"Well, crooks are going to find ways around that regulation as well, they got lawyers..." -- Zeev
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I agree - there are no incentives for a "dirty" CEO to come clean at this point. If one were to 'fess up and admit to misstatements, lies or otherwise "cooking the books", he would be subjecting himself to possible jail, an almost certain end to his business career, and possible loss of all his assets. Why not take the chance and try to work toward cleaning the books as fast as possible or just hope it is never discovered? If that did not work out, he would just use some defense on the order of "I am SHOCKED and OUTRAGED that this has happened without my knowledge......"
I think the exceptions might be with new CEO's like IBM or GE where they would not knowingly want to take on someone else's liability, or as in the case of the many companies that have dropped Arthur Anderson as their auditors and the new auditors want to clean the air and blame all the problems on Arthur Anderson. In either case the defense will be "THEY DID WHAT????? I CAN"T BELIEVE IT"
The problem of course is that those latter two possibilities cover a lot of companies that could foul the air with bad news over the next few weeks. I personally think that an even larger problem for the market going forward is that the "all is wonderful" guidance we are used to will turn significantly more negative, both from a deteriorating economy and from more honest and conservative company forecasts - for some, it will involve gradually cleansing the books.
Overall, aside from the initial "feel good" for the small investors, I see all of this as a longer term negative for the markets until all of the bad news is out and folks are more used to much more conservative reporting and estimates - that could take a while.
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