DESCRIPTIONThe United States has the best stock markets in the world, many people believe. And the SEC works hard to keep them that way. The U.S. markets are the broadest and fairest anywhere. The average American can trade with little fear of rigged markets or insider dealings. But there is a dark side to this environment of perfectly liquid markets. Unwittingly, the U.S. system nurtures market liquidity at the expense of good governance. The system prevents shareholders from engaging managers in candid dialogues and providing informed oversight and counsel. It encourages capable executives to neglect their fiduciary duties, thus injuring the long-term interests of companies and shareholders. Clever tinkering with insider-trading and disclosure laws cannot get around the basic conflict between market liquidity--which requires transient, arm's length shareholding--and close, honest shareholder-manager relationships.