The big question in corporate governance these days is whether the pendulum has swung too far in the direction of regulation. It comes as no surprise to learn that the Cato Institute, the libertarian-minded Washington think tank, thinks it has. Cato has laid out its case in a book of short, accessible essays titled After Enron (Rowman & Littlefield), and while it may not be completely convincing, it forces those of us who welcome most of these regulations to think hard and critically about them. Cato chairman William Niskanen argues that too much has been made about getting the accounting right and not enough about the plain, old bad business judgment of top executives. And R.T. McNamar, a former Cato fellow, would impose tough new obligations on the bankers, lawyers and accountants who aid and abet corporate fraud. Less convincing are Alan Reynolds's defense of the "free market" in which chief executive pay is set, or Niskanen's view that regulation of accounting and disclosure standards should be shifted to stock exchanges. In Niskanen's idealized world, exchanges would compete to see which could offer the best investor protections -- a possibility that ignores the history of the '90s boom, when the exchanges acted more as cheerleaders than regulators.

-- S.P.