Any professional boxer worth his salt will tell you the rules of the game matter. Fighters box in weight classes with specific rules like no hitting below the belt. It's boxing after all; not a gladiator match. Democracy could take a few lessons from boxing, especially now that corporations have the same First Amendment rights as living, breathing citizens. Over the past few weeks, a growing consensus among shareholders, corporate leaders and corporate law experts has emerged. All are urging increased transparency for corporate money in politics.

What are the key rules of the game in a modern American election? Who can be a candidate, who can vote, and who can spend money on the election. It was this third rule that changed last year. Before 2010, corporations were barred from spending in federal elections and in roughly half the states. The Supreme Court changed this in Citizens United allowing them to purchase as many political ads as they could afford. So if democracy were a boxing match, now we have flyweights in the ring with super heavy weights. This is why so many election watchers consider Citizens United to be an electoral game changer.

But election wonks are not the only ones worried about the impact of corporate dollars in American elections. Corporate law experts have also voiced their objections. Corporate law professors including Bebchuk and Coates at Harvard, Jackson and Gilson at Columbia and Klausner at Stanford have expressed concern that the Supreme Court has fundamentally misunderstood how corporate democracy works. Or as Former Chancellor William T. Allen stated at a recent symposium called Accountability After Citizens United, "normatively, I believe business corporations should not be in the business of making political contributions. It's not what the institution is designed for."

While the Supreme Court in Citizens United envisioned a world where shareholders could hold managers accountable for political spending, corporations have several clever legal ways to hide their role in politics from the public. This lack of transparency has been noted by Professors Schepers and Gardberg at Baruch who recently released a corporate political disclosure index. They found that on average those companies spending the most on politics were disclosing the least.

Our capital markets are premised on transparency of information so that investors can compare firms apples-to-apples and invest in the best fit. Keeping big corporate political expenditures hidden from investors may distort markets. Furthermore, shareholders can't hold managers accountable for political spending that they don't know about. The ability of shareholders to object to spending that they can't see is like asking them to box blindfolded.

This week the Committee for Economic Development (CED) is urging companies to stay out of the political thicket. CED is a nonpartisan organization of more than 200 business executives and university presidents, and is a thought leader in the business world. CED is also urging that if companies engage in politics then, they should do so transparently.

Meanwhile shareholders have also quickly engaged on the issue of corporate political spending post-Citizens United. One problem is corporate political spending may trigger costly objections from customers or business partners. The boycotts of Target over its political expenditures in the 2010 Minnesota governors race showed this to be true. Nearly a year later, shareholders were still voicing their objections to this spending at Target's annual meeting in 2011. The reason why Target's shareholders knew about this spending was Minnesota has some of the best political disclosure laws in the country. (Minnesota's good law was recently upheld by the Eighth Circuit, but it was reheard en banc last week).

This is why we need common sense corporate law solutions to address the multiple problems created by Citizens United. There is legislation which would address this problem called the Shareholder Protection Act. It has been introduced in both Houses of Congress and it would give shareholders not only the ability to see corporate political spending, but also the ability to have a say through a vote at annual meetings. The bill is based on the UK's Companies Act, which requires shareholder authorization of corporate political expenditures before the money is spent, as well as clear disclosure of where the money went. And this will have an impact not just on corporate law. If the investing public can see the source of corporate political spending, then so will voters who could take this information into account at the ballot box.

Of course, legislation can take a long time to come to fruition especially with our current fractured Congress. In the meantime, investors can file shareholder proposals (under Rule 14a-8) directly with companies requesting more transparency and accountability. One such proposal won over 53% of the vote this year at Sprint. Another approach is to send the Securities and Exchange Commission (SEC) petitions requesting a new rule for publicly traded companies. A petition was recently filed by 10 corporate law professors urging the SEC to adopt a new disclosure rule on corporate political spending.

With corporations on the American political scene for the foreseeable future, we need to adopt new sensible rules of the game so that we have fair, clean fights in elections to come.

Ciara Torres-Spelliscy is an Assistant Professor at Stetson University College of Law and the co-author with economist Kathy Fogel of "Shareholder-Authorized Corporate Political Spending in the United Kingdom".  This article was first published on the Huffington Post and is republished with the author's permission.

A recent short video of a TED conference presentation by Kathryn Schulz talked about being wrong.

Kathryn Schultz

Schulz, who wrote Being Wrong: Adventures in the Margin of Error, said at TED that we hate to be wrong; we do all we can to avoid thinking about our being wrong. We think that getting something wrong means there is something wrong with us: “so we insist we are right; it makes us feel smart, virtuous, and safe.”

The problem, she points out, is the internal sense of rightness we experience is not reliable. “Trusting too much in feeling you are on the right side of anything can be dangerous.” She illustrates her point by saying that is how we got a torpedoed economy and 200 million gallons of oil dumped into the Gulf of Mexico.

Her TED talk has other rich ideas about being human and stepping outside our “rightness,” but her concept of “error blindness” made me think of  a number of examples where being so wedded to one’s own sense of reality had backfired. Unfortunately for leaders, their backfires make headlines.

I was reminded of Renault’s espionage case; Alan Greenspan’s dogged devotion to a market theory; a county politician’s belief about what isn’t offensive; and how the Dodgers franchise has been jeopardized by divorcing owners’ sense of personal privilege.

Renault's Carlos Ghosn

Renault CEO Carlos Ghosn wrongly accused three employees in Renault’s electric car program of selling information to the Chinese based on what the French government called a mishandled internal investigation. The problem for Ghosn was compounded by his defending the spy claims in an interview on a national French television channel saying he had “certainties” about it.

Ghosn publicly apologized and, with those senior executives involved in the investigation, waived 2010 bonuses and 2011 stock option entitlements.  They endured a public reprimand by the French government, Renault’s largest stakeholder. A security agent was later arrested for fraud and the company is revamping its security operation.

For former Federal Reserve Chairman Alan Greenspan it was about the certainty of his view on how markets behave. He was forced to admit to the House Oversight Committee that his world view, considered by critics to have led to the economic meltdown, turned out to be flawed.

Then there are the everyday convictions which demean others. Orange County (CA) Republican Party official Marilyn Davenport sent an email message to her mailing list with President Obama’s face superimposed over a chimpanzee saying “Now you know why — No birth certificate.” County Republican Party Chair Scott Baugh, one of the recipients, asked for her resignation; thus far she has refused.

At the press conference this week, she apologized to anyone she offended, saying she hadn’t realized how much it would offend people: “I offended the black people” and “I humbly receive your rebuke.” She apparently ruled out that those not African America could also be offended.

Frank and Jamie McCourt

The divorce war of Dodger owners Frank and Jamie McCourt is a cautionary tale of what happens when leaders make it about their right to lead rather than how they are leading.

While they have played out their tug of war over team ownership, media criticism has escalated the past 18 months over their Dodger stewardship, divorce filing revelations about lavish personal spending, and the franchise’s financial integrity. TMZ.com is reporting that the IRS has begun an investigation of the McCourts.

This week, Major League Baseball (MLB) Commissioner Bud Selig announced the MLB was seizing control of the Dodgers and would appoint a trustee to oversee its operations. Frank McCourt’s brief response said the Dodgers were in compliance with MLB guidelines. In other words, as bad and public as this drama and increased debt have become, McCourt isn’t budging from the rightness of his position.

So with these illustrations and more you can think of, what can we do about hating to be wrong?

The most basic is to accept it is part of being human and figure out how to mitigate our vulnerability through our receptivity to information that may be in conflict with our world view. The more we stay open to the possibility we could be wrong, the more likely we are to get beyond our own “rightness” and experience a larger reality.

It is really akin to developing an entrepreneurial spirit to constantly question, test, and have a world view that is organic, not fixed; connecting rather than isolating.

As to the minds that create racist responses or narcissistic entitlement, being “wrong” may feel especially frightening so the control they impose makes “error blindness” more pronounced, their internal sense of rightness more fallible, the potential consequences of being wrong more dire, and ethical leadership more implausible.

Gael O’Brien is a Business Ethics Magazine columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics, a weekly column where this article was first published.

When financial results aren’t what they seemed to be – and a company is forced to issue material financial restatements - how does it recoup the incentive pay and bonuses that were awarded to senior managers on the basis of rosier outcomes?

It’s not a simple process, as evidenced by reactions to a provision in the newly-enacted Dodd-Frank financial reform legislation viewed by governance advocates as effective in increasing management accountability for financial results.

Under the law, companies must develop policies to recoup improperly awarded compensation from all current and former “executive officers” for three years preceding the date on which the company was required to file a restatement.

Such financial restatements are not uncommon.  From 2002 through 2009, there were over 2,900 negative restatements of net income by listed public companies, according to an analysis by the law firm Latham & Watkins.

And most companies do not have clawback policies in place.  Only about 17% of 3,680 companies have disclosed clawback policies that at least cover senior management, up from a handful in 2005, according to proxy advisers ISS, as reported in The Wall Street Journal.

Large companies are more likely to have clawback policies: 71 of the largest U.S. companies have policies in place, according to a new survey by the law firm Shearman & Sterling.  But even those will likely need to be revised and updated in response to forthcoming SEC regulations regarding the Dodd-Frank requirements.  The SEC has said it will publish rules in time for the 2011 proxy season.

Proper Risk Management

When designed properly, a policy allowing for clawback of pay from high-level executives “is a significant mechanism for corporate accountability,” says former GE senior vice president Benjamin W. Heineman, Jr., writing on the Harvard Law School Forum on Corporate Governance and Financial Regulation.

The problem, according to Mr. Heineman, is that hundreds of companies that don’t have policies must now design one.   Among the questions they need to answer: Which executives are covered by a policy?  What event triggers implementation of a clawback?  What types of compensation should be recovered?  What is the forum for resolving issues?  Is a “holdback” (cancelling unvested benefits) better than a clawback?

Mr. Heineman makes a number of recommendations for what he calls a “broad, flexible holdback/clawback approach” for holding senior leadership accountable to what he says is the fundamental mission of the corporation: “proper risk taking balanced with proper risk management and the robust fusion of high performance with high integrity.”

Clawbacks are not entirely new.  The Sarbanes-Act of 2002 gave the SEC the power to recover restatement-related compensation and stock profits from Chief Executive Officers and Chief Financial Officers.

But the Dodd-Frank Act expands the breadth of the clawback requirement, according to the Latham & Watkins analysis, because it requires reimbursement from a broader pool of “executive officers” and forces the company (not the SEC) to take action.   The Dodd-Frank legislation also expands the period subject to compensation clawback and, importantly, does not require a restatement to have been the result of “misconduct” by an executive, as required by Sarbanes-Oxley.

Latham & Watkins suggests that the Dodd-Frank clawback provision may provide shareholder plaintiffs and shareholder activists “with a major new weapon.”

“We will not be surprised to see shareholder plaintiffs bring derivative suits challenging the implementation of the company’s clawback policy and attempting to exercise the company’s rights to repayment,” the firm says. “Whether such suits will find any measure of success and how often they will be filed is difficult to predict.”

When it’s time for salary reviews at Xcel Energy, a Minnesota-based energy company, earnings per share are not the only thing that matters.  In its 2009 corporate proxy statement, Xcel explains how a range of sustainability metrics fit into annual incentive objectives for all executive officers and how it weighs greenhouse gas reductions and safety performance alongside earnings per share.

Company spokeswoman Patti Nystuen told the sustainability group Ceres, “Xcel believes strongly in providing long-term incentive opportunities that deliver awards on the achievement of specific performance goals linked to the success of the company and its long-term strategy in the core utility business.  These include financial and environmental goals."

Xcel is one of a small but growing group of pioneering companies, increasingly aware of the power that policies on executive pay can exert on sustainability behavior.

Seventy-five per cent of Xcel's award incentives have a performance-based vesting schedule based on earnings per share growth.  The remaining quarter of Xcel's awarded incentives are performance-based, relating to aspects of their environmental strategy, such as decreases in emissions.

"In 2007, payouts of annual incentive awards for the NEOs (named executive officers) and all executive officers, including those reporting to the chief executive, were determined entirely by attainment of corporate goals, which included targeted earnings per share, an environmental metric related to carbon dioxide emissions, and safety," Nystuen said.

Across the Atlantic

In Europe, the Netherlands seems to be ahead of other nations in tying remuneration to sustainability objectives.

Dutch banking and insurance giant ING said recently that social, ethical and environmental objectives are to form a component part of its top management executive pay structure.

“ING has formulated corporate responsibility ambitions and priorities, combined with a long-term plan and concrete targets,” the company says in its 2009 corporate responsibility report. “These targets are also part of the performance objectives of our Executive and Management Boards.” The company said there will also be a program for senior managers to work on real-life cases at NGOs in developing countries.

At least three other Dutch firms – chemical company Akzo Nobel, life sciences group DSM, and mail operator TNT – have tied executive compensation to environmental improvement and other objectives, including employee and customer satisfaction.

And in one case, the linkage of pay to sustainability has been introduced to justify potentially controversial management decisions.   The oil giant Royal Dutch Shell, in a disclosure regarding its development of Canadian oil sands resources, makes the point that the company is “actively managing environmental and social impacts,” specifically noting that  “performance on sustainable development is a key feature of management targets and remuneration.”

On the Boardroom Agenda?

These initiatives come in the wake of two reports from organizations, based on opposite sides of the Atlantic, which have argued that the integration of sustainability into executive pay structures is one of the best ways for businesses to marry the twin objectives of sustainability and profit.

The first, published last month by Ceres, the Boston-based coalition of institutional investors and environmental organizations, reveals that an increased focus on corporate governance following the financial crisis of the last few years has now forced environmental sustainability onto boardroom agendas.

"Corporate scandals and the current economic crisis have heightened demands for new approaches to governance, particularly in relation to executive compensation and risk management,” say the authors of the report The 21st Century Corporation: The Ceres Roadmap to Sustainability.

“As sustainability has risen up the corporate, investor and public policy agendas, it has become more fully integrated into these governance expectations," they add.

The report calls on boards to undertake a root-and-branch reorganization of remuneration structures and base executive pay partly on a CEO's ability to integrate sustainable practices into day-to-day operations.  It also highlights the fact that many regulators and shareholders are putting pressure on boards to do a better job of aligning executive pay and performance standards tied to more than short-term profits.  In this top-down corporate governance structure, it calls on companies to name directors who have expertise in environmental sustainability issues.

Critical Challenges

Meanwhile, in its third Remuneration Theme Report, the European Sustainable Investment Forum (Eurosif) has revealed that most European companies fail to link executive pay to environmental, social, and governance (ESG) performance.

The report highlights some critical challenges and opportunities for companies in relation to remuneration, incentives and long-term sustainability.  Research highlights and recommendations for shareholders and regulators include:

• 29% of FTSE Eurofirst300 listed companies have some commitment to linking remuneration to ESG performance – although concerns exist around the extent to which performance targets are set as ‘soft targets,’ thereby guaranteeing a minimum level of bonus.
• Financial institutions account for 23% of the FTSE Eurofirst300 index but only 16% of financial institutions have an ESG-linked remuneration system.
• Shareholders should engage with companies by voting against unacceptable remuneration packages and calling for and taking part in shareholder dialogue in determining remuneration policy.
• Regulators should promote active dialogue between companies and shareholders by legislating for a binding “say on pay” vote and setting appropriate guidelines to promote good remuneration practices and disclosure.
• In the aftermath of the global financial crisis, remuneration policies and specifically the level of bonuses of senior executives of companies and traders continue to hit the headlines.  Investors and regulators have expressed concern that remuneration structures may have contributed to excessive risk-taking and are asking for a stronger focus to be placed on long-term reward schemes and sustainable growth.

Much Work Still to Do

Although steadily increasing, examples of such strategies remain fairly thin on the ground and it is clear that much work remains to be done in strengthening their influence.  For example, a 2009 research paper written by academics at IESE Business School and Arizona State University found that in general firms with an explicit environmental pay policy and an environmental committee do not reward environmental strategies more than those without such structures, suggesting that these mechanisms often play a merely symbolic role.

A major challenge: linking today's compensation package to policies and practices whose impact may not be felt for many years to come.

One means of improving the situation, as outlined in a recent report by a group of advocacy organizations that included the U.K.'s PLATFORM and Friends of the Earth, could be to link executive pay to companies’ long-term financial, environmental and social performance, for example through company bonds and equity held in escrow accounts for directors and released after 10-20 years.

Debates over corporate governance and accountability in the wake of the recent global financial crisis have already highlighted the crucial importance of top executive pay policy as a means of influencing business behavior.  The reports and initiatives outlined above extend this reasoning, by revealing that management remuneration packages are now also recognized as an increasingly important weapon in the armory of campaigners seeking to achieve sustainability objectives.

Andrew Williams (TheGreenExpert@btinternet.com) is a U.K.-based freelance writer.

Toyota’s announcement of a technical fix for its sticky gas pedals – which can lead to sudden acceleration problems - is not likely to bring a quick end to the company’s current recall nightmare.

Having already halted sales and production of eight of its top-selling cars in the U.S. - and recalled more than 9 million cars worldwide, in two separate recalls – Toyota faces the prospect of billions of dollars in charges and operating losses. The Toyota brand, once almost synonymous with top quality, has taken a heavy hit.

While all the facts are not yet in, it’s clear that Toyota’s crisis didn’t emerge full-blown overnight.   Fixing the problem and ensuring that something like it doesn’t happen again will require an all-out effort, from assembly line to the boardroom.  Even then, there are no guarantees. Maintaining a good corporate reputation in the 21^st century is tricky business indeed.

Toyota’s case offers a number of valuable lessons for other business people and companies to consider.  Here, for starters, are five:

Aggressive growth can create unmanageable risk. Toyota’s desire to supplant General Motors as the world’s number-one car-maker pushed it to the outer limits of quality control.

“The evidence that Toyota was expanding too much and too quickly started surfacing a couple of years ago.  Not on the company's bottom line, but on its car-quality ratings,”  writes Paul Ingrassia, a Pulitzer Prize-winning former Detroit bureau chief for The Wall Street Journal.

Ingrassia, who has just authored a new book on the auto industry, notes that in 2005 Toyota recalled more cars and trucks than it sold; by 2007, Consumer Reports magazine stopped automatically recommending all Toyota models because of quality declines on three models.

One wonders if, when accepting management’s plan for aggressive growth, Toyota’s board of directors exercised appropriate diligence to ensure that growth could be achieved without betting the entire franchise.  Were quality control and safety part of the discussion?  Maybe gaining market share wasn’t worth the trade-off.  Quick tip to directors of other high-growth-oriented companies: read up on Merrill Lynch’s experience with dominating the sub-prime mortgage market.

Get the facts quickly and manage your risks aggressively. One of the more troubling aspects of Toyota’s recalls (there have been two) has been the company’s differing accounts of the source of the problem.  The current recall, covering 4.1 million cars, involves potentially sticky gas pedals.  Late in 2009, Toyota also recalled 5.4 million cars whose gas pedals could get stuck on floor mats.  Plus, Toyota says there are some cars affected by both problems.  (For an interesting technical analysis of some of the issues involved, go here.)

Uncertainty is not an asset, especially when lives could be at stake.  A Los Angeles Times investigation, for example, casts doubt on Toyota’s explanation, quoting one auto safety consulting group as saying, "We know this recall is a red herring."  (Read Toyota’s position here.)

And the questioning is just beginning.  A U.S. Congressional committee headed by Rep. Henry Waxman has already requested copies of emails and other documents from both Toyota and the National Highway Traffic Safety Administration, which regulates Toyota with regard to the recalls.   Congressional hearings are scheduled for Feb. 25.

In cases such as this, investigators almost always start with two time-worn questions.  What did you know?  And when did you know it? Answers to those questions provide the groundwork for analysis of a company’s response and handling of a problem.  Were employees encouraged to flag safety issues to senior management?  Were sufficient resources devoted to investigating the problems?   When did the board become aware of the situation and what did it do about it?

Companies generally can’t predict when crises might occur.  However, good internal risk assessment programs can help identify those areas of the business where management should be on the alert.   Robust risk management programs help a company address problems as they pop up on the internal corporate radar screen – and before they explode in public.

Your supply chain is only as strong as your weakest link. The reality is that auto companies make hardly any of their parts.  They assemble cars from parts made by others.  In this case, the offending gas pedal assembly was made for Toyota by a company called CTS of Elkhardt, Indiana.

It’s far from certain how much blame the parts supplier deserves.  In fact, CTS says Toyota’s acceleration problems date back to 1999, years before CTS began supplying parts to Toyota. (And the replacement gas pedal parts Toyota has announced as a fix for the problem will be made by CTS, suggesting a degree of confidence in the supplier.)

Nonetheless, “(if) you are outsourcing for your entire vehicle line, [and] the outsourced component is defective, the recall and the embarrassment is much greater,” iconic car company critic Ralph Nader told Toronto’s Globe and Mail last week. “The overall message is that quality control [means] daily vigilance,” Nader said. “You can't coast on your reputation because it can fail very quickly.”

Supply chain monitoring is a critical factor for companies that rely on third-party suppliers. That’s increasingly true for a broad variety of industries, not just automobiles, as business grows ever more global.  Smart companies will know their suppliers and their respective strengths and weaknesses.

Accept Responsibility.  This is one area where Toyota seems to be doing a good job, albeit maybe a year or more too late.

Toyota's National Ad on Recall - January 31, 2010

Two decades ago, when Audi encountered a safety issue similar to Toyota’s, Audi took the position that “it was the driver’s fault,” David Cole, Director of the Center for Automotive Research, told Design News.  Coles says that reaction ultimately hurt Audi’s reputation.

Toyota seems to be avoiding the appearance of passing the buck.  When pressed by the New York Times about problems that might have been caused by supplier CTS, for example, Toyota spokesman Mike Michels said: “I don’t want to get into any kind of a disagreement with CTS. Our position on suppliers has always been that Toyota is responsible for the cars.”

Accountability matters enormously.   Johnson & Johnson’s 1982 recall of its painkiller Tylenol, following the deaths of seven people in the Chicago area, has earned it a permanent place in the annals of crisis management.  But that recall stemmed from the deadly act of an outsider (who has never been caught), not any problem with the product itself, as is the case with Toyota.

Take the Long View. The three leading factors burnishing corporate reputation these days are "quality products and services, a company I can trust and transparency of business practices,” writes public relations executive Richard Edelman, who last week released his corporate “Trust Barometer” survey for 2010.

That’s unfortunate news for Toyota, given the hand that it’s currently playing.  But the company doesn’t have much choice.  By one estimate, auto industry recalls conservatively cost an average of $100 per car - suggesting that Toyota might be on the hook for at least a one billion dollar charge.   That doesn’t include lost revenue to Toyota and its dealers from the production shutdown.  And competitors are already trying to woo customers away and capitalize on Toyota’s misfortune.  Disgruntled investors and Wall Street analysts will make the company aware of their feelings; class action lawsuits are almost a certainty (one lawyer is already searching for Toyota customers as clients).

Reputation can be easily lost – and Toyota’s reputation is indeed threatened – but it’s highly unlikely the company will collapse completely.  And that may be one of the one of the biggest lessons for other companies as they study how Toyota emerges from this recall crisis.  The reality is that Toyota is positioned for recovery about as well as it could be – owing, in large measure, to the reputation for quality products and corporate responsibility it has developed over the last two decades.  That reputation is a valuable asset, and one that Toyota will undoubtedly be citing and calling upon, in the weeks and months ahead.

by Michael Connor

There will no doubt be a fair amount of theater this week as the Financial Crisis Inquiry Commission holds its first public hearings exploring the causes of the 2008 financial crisis that nearly catapulted the U.S. and world economies into a 21^st century Great Depression.

Front and center on the commission’s first Wednesday panel will be four men likely to be cast as star players.  They are CEOs of the nation’s top banking companies: Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JP Morgan Chase, John Mack of Morgan Stanley and Brian Moynihan of Bank of America.

As with much great theater, however, there’s another potential star in this drama that you might want to keep on eye on: the commission’s chairman, Phil Angelides.

While not a familiar name in most American households, Angelides is well-known to Californians.  A native of that state, he’s a career politician who most recently ran and lost as the Democratic candidate for Governor in 2006.

The financial industry is very familiar with him as well.  Angelides has been a leader in the corporate reform movement and has long been engaged in socially responsible investing.  As California's state treasurer from 1999 to 2007, with responsibility for overseeing the California Public Employees’ Retirement System (CalPERS), the largest state pension fund in the nation, he pressed banks and Wall Street firms for greater disclosure and transparency for investments

Angelides was also among the most vocal critics calling for the resignation of New York Stock Exchange Chairman Richard Grasso, after the scandal over his $140 million pay package. “It is fundamentally important that Grasso resign so that the New York Stock Exchange can restore its moral authority,” he said at the time. Angelides also threatened to stop giving state business to Wall Street firms that didn't meet conflict-of-interest standards.

So what can we expect from Angelides as chair of the federal commission?  He and the commission’s vice chair, Bill Thomas, a Republican and former Congressman, have hired a staff of professional lawyers and investigators.  They’re charged with identifying the causes of the financial meltdown and maybe (just maybe) reforms that might prevent another one from happening any time soon.   Their full report is due December 2010.

In a video interview last September with Nightly Business Report’s Darren Gersh, Angelides laid out an ambitious agenda for the commission.   Drawing conclusions about what really happened, he said, is critical.  What role did credit rating agencies play?  What was happening in the mortgage markets?  What did regulators do, or not do?

The commission is likely to identify criminal behavior, Angelides told Gersh, though its goal is not a “star chamber” proceeding where investigators “line 20 perps up against a wall.”  Indeed, Angelides notes, it’s likely that the commission will identify much that’s non-criminal, “egregious practices that we don’t want repeated again” but which were “applauded” only a few years ago.

There’s an understandable tendency by pundits and public alike to view the likely outcomes of this process with some skepticism.   There doesn’t appear to be any serious consensus on potential reform of the finance industry; in fact, not much has changed, and with Wall Street likely to announce a new round of enormous bonus awards this week, bad habits are seemingly being reinforced.

The process will play out, and if we’re lucky, it will establish at least some official record of events in addition to the inevitable theater that surrounds such hearings and investigations.  But the results need not be entirely without merit.  The 9/11 Commission appointed by President George W. Bush – officially known as the National Commission on Terrorist Attacks Upon the United States – did not rock the world with its revelations, but it did at least generate a factual basis for later discussion and debate.

The hope is that Angelides, together with his fellow commissioners and staff, will be able to build sufficient consensus around some scenarios and theories regarding causes of the financial meltdown.  And from that, hopefully, will emerge some consensus for reform.   It’s probably wishful thinking, but in the absence of some leadership on these issues, we’re likely doomed to have this awful bit of financial history repeat itself, probably not far into the future.