Executive summary.

The Enron-era corporate abuses were of such magnitude that the public demanded concrete structural reforms, which Congress delivered via the Sarbanes-Oxley Act of 2002, the most dramatic shift in corporate governance since the Securities Acts of the New Deal. Directors are now expected to assume new, increased levels of accountability and oversight for the boards that they serve, and raise the bar on ethical behavior if U.S. investors are to restore their faith and trust in big business.

The boundaries of this new era are still being shaped. Corporations and stakeholders now struggle over the best approach to ensure good corporate behavior: a rules-based approach or principles-based approach. There is an inherent limitation to rules, as no regulator (government or otherwise) is fast enough or smart enough to effectively regulate a corrupt system. Experts agree there must be a blend of cultural and ethical reform, but the balance among regulation and ethical culture and rules and principles has yet to be calibrated.

Strong ethics are produced by culture, not structure. On the other hand, the now-mandated independent director oversight committees were determined by many to be necessary to clarify that ultimate responsibility for effective corporate governance rests with a company's independent directors. It is clear that directors should have been doing more in the many cases of abuse. While many boards have...