Wulf A. Kaal

Document Type

Response or Comment

Publication Title

Emory L. J. Online


In his article Excessive Corporate Risk-Taking and the Decline of Personal Blame, Professor Schwarcz succinctly identifies the shortcomings of the existing regulatory infrastructure in the context of risk-taking, and he evaluates the adequacy of firm-level liability. While Professor Schwarcz's main points are of course well taken, and he certainly makes a tremendous contribution to the literature on excessive risk-taking by executives, a key assumption underlying most of the proposals Professor Schwarcz analyzes is that rules could and should be optimally tailored to address a perceived regulatory problem. In an environment of exponentially increasing disruptive innovation, such assumptions may not be justified. In fact, the assumption that stable and optimal rules are a necessary and adequate remedy in many ways supports and perpetuates excessive risk-taking by executives, financial crises, and financial regulatory cycles. A key role for scholarship in this context could be the evaluation of supplemental governance mechanisms that help the main regulatory framework adapt to constantly changing market environments, disruptive (financial) innovation, and the regulatory environment.

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