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New York Stock Exchange, 1946
For Educators:
Corporate Governance
More on This Lesson:
Lesson Plan

This lesson is designed for Social Studies classrooms, grades 9-12

Lesson Objectives

By the end of this lesson, students will be able to:
  1. Analyze a political cartoon related to recent corporate scandals.
  2. Complete a graphic organizer on the U.S. Securities and Exchange Commission (SEC), established as part of the New Deal under the 1934 Securities Exchange Act.
  3. Work in groups to develop SEC reform strategies for rebuilding investor confidence today.
  4. Synthesize the most promising reform ideas in recommendations to the SEC chairman.

Related National Standards

Economics Standards
Standard 2
Understands characteristics of different economic systems, economic institutions, and economic incentives

Level IV, Benchmark 5
Understands that in every economic system consumers, producers, workers, savers, and investors respond to incentives in order to allocate their scarce resources to obtain the highest possible return, subject to the institutional constraints of their society

U.S. History Standards

Standard 24
Understands how the New Deal addressed the Great Depression, transformed American federalism, and initiated the welfare state

Level IV, Benchmark 1
Understands the first and second New Deals (e.g., the success of the relief, recovery, and reform measures associated with each)
Standard 31
Understands economic, social, and cultural developments in the contemporary United States
Level IV, Benchmark 1
Understands how changes in the national and global economy have influenced the workplace (e.g., sluggishness in the overall rate of economic growth, the relative stagnation of wages since 1973, the social and political impact of an increase in income disparities, the effects of increased global trade and competition on the U.S. economy, the influence of new technology on education and learning, and the relation between education and earnings in the workplace)
Civics Standards
3. Understands the sources, purposes, and function of law, and the importance of the rule of law for the protection of individual rights and the common good.

9. Understands the importance of Americans sharing and supporting certain values, beliefs, and principles of American constitutional democracy

25. Understands issues regarding personal, political, and economic rights

26. Understands issues regarding the proper scope and limits of rights and the relationships among personal, political, and economic rights

Estimated Time to Complete Lesson

This lesson is designed to be completed in approximately two 50-minute class periods.

Materials Needed

  • SEC organizer (PDF file) (download)
  • Internet access, or copies of relevant pages
  • Large sheets of paper and pens
  • Copy of 9/27/02 NOW WITH BILL MOYERS broadcast (optional) and TV/VCR. (Note: A free transcript of this segment is available on the NOW Web site. Teachers may also tape the broadcast off-air and use it in the classroom for one year. Alternatively, programs are available for purchase from ShopPBS (

Backgrounder for Teachers

Both in recent times and during the early 1930's, low investor confidence in financial markets led to low stock values and a sluggish economy. As part of the New Deal's Relief, Recovery, and Reform efforts, Congress passed the 1933 Securities Act and the 1934 Securities Exchange Act. The latter established the U.S. Securities and Exchange Commission (SEC) and endowed it with broad powers over the securities industry.

NOW's SEC Description and Timeline provides details of these powers and summarizes key events and legislation passed related to the SEC's operations.

This lesson examines the role of the SEC and connects the circumstances of its creation to the corporate scandals of the early 21st century. The Related Resources section of this lesson provides helpful links for strengthening your background on subjects related to this lesson. Another useful article for teachers on issues related to corporate governance and investor confidence is The Value of Trust.

Assumed Student Prior Knowledge

It is assumed that students are familiar with the causes of the 1929 Stock Market Crash and the onset of the Great Depression. This lesson would be especially effective as part of the class' study of the New Deal.

Teaching Strategy

1. In preparing for the lesson, select a political cartoon on recent corporate scandals that is appropriate for your students' background knowledge and abilities. The Cartoon Web has aggregated a number of political cartoons on corporate scandals. From this collection, you may find the following cartoons particularly effective for introducing this lesson:

2. At the beginning of class, display the cartoon you selected for students. Instruct students to take five minutes to study the cartoon and write down their answers to the following questions:
  • What real people, if any, are depicted in the cartoon? Describe how the cartoonist represented them.
  • What symbols are included in the cartoon? What do they represent?
  • What is the central message of the cartoon?
  • What issues or events inspired the cartoon?
3. After five minutes or so, discuss student answers. Focus especially on the last question, briefly reviewing events and charges in two or three recent corporate scandals. (NOW WITH BILL MOYERS provides details of the Enron and Merrill Lynch scandals. You could also mention Xerox, Global Crossing, Arthur Andersen, Worldcom, Tyco, etc.) List some of the activities of misconduct on the board, such as fraudulent financial statements, limited disclosure to investors, insider trading, etc.

4. Explain that these corporate scandals have severely damaged public confidence in the stock market and that stock values have plummeted. Remind students that following the 1929 Stock Market Crash and ensuing depression, people were also wary of the market's stability. At that time, it was believed that restoring the public's faith in the stock market was an important step in the nation's financial recovery. Tell students that Congress held hearings to identify problems and figure out solutions. Based on the findings of these hearings, Congress passed the Securities Act of 1933, and the Securities Exchange Act of 1934 that created the Securities and Exchange Commission (SEC) to oversee needed reforms and serve as a "watchdog" to help ensure the integrity of financial markets. Explain that corporate boards of directors, Congress, auditors, the courts, and others also play watchdog roles, but that students are going to be focusing on the role of the SEC for this lesson.

5. Distribute copies of the SEC organizer. Have students work in small groups (3-4 students each, depending on class size) to fill-in the organizer, using NOW's SEC Description and Timeline and the About the SEC page on the SEC Web site as references.

6. Next, ask each group to consider recent activities of misconduct (listed on the board) and brainstorm what the SEC could do to rebuild investor confidence today. Have each group list their ideas on large sheets of paper and post their ideas on the wall of the classroom when they are finished. Groups should assign a "recorder" to capture the group ideas on paper, and a "reporter" to represent the group in front of the class.

7. Each group's reporter should then explain his or her group's thinking to the class. Allow time for questions and discussion.

8. Ask students to individually write a letter to the chairman of the SEC recommending what they believe to be the top three ideas for reform developed by the class. In the letter, they should include the rationale for each idea and the results anticipated from implementing these reforms.

9. After students have turned in their letters to you, reveal steps the SEC has actually taken in response to recent corporate scandals. A June 12, 2002 Jim Lehrer interview with SEC chairman Harvey Pitt provides a helpful summary of new SEC rules, as does the SEC Web site. Discuss with students the similarities and differences between class recommendations and actual rules developed by the SEC.

Assessment Suggestions

  • Assess student work on the SEC organizer for accuracy and for having completed all sections.
  • Evaluate presentations of group work to the class for quality and content.
  • Grade student letters for including required information, depth of analysis, and writing mechanics.

    Extension Ideas

    1. Have students identify the roles and responsibilities of other "watchdogs" of corporate fraud, including corporate boards, auditors, investment banks, lawyers, etc. FRONTLINE's primer on corporate watchdogs provides an excellent reference for such an exercise. Then, watch the approximately 45-minute NOW WITH BILL MOYERS roundtable discussion on corporate reform. Before viewing, provide students with the names and positions of each roundtable participant. (See the biographies of the roundtable participants for details.) While watching the discussion, have students list specific ideas for reform mentioned by roundtable participants that affect each watchdog group previously identified. (Note: A free transcript of this discussion is available on the NOW Web site. Teachers may also tape the broadcast off-air and use it in the classroom for one year. Alternatively, programs are available for purchase from ShopPBS (

    2. Ask students to create their own political cartoons depicting the anticipated results of the reform measures they developed in their groups.

    3. Distribute copies of Bill Moyers' commentary on Wall Street reform. Have students identify Moyers' key messages and discuss whether or not they agree with him.

    4. Examine the U.S.'s World War II strategic bombing and blockade strategy to weaken the economic infrastructure of Axis powers. As NOW's SEC Timeline notes in its 1941-1947 entry, the SEC's Economic Warfare Unit used enemy and American business records to identify weak spots and provide a list of strategic targets. See the SEC History by Era: WWII summary for more information.

    Related Resources

    June 12, 2002 Interview with SEC Chairman Harvey Pitt
    This NewsHour interview details new rules designed to build investor confidence and addresses issues related to enforcement. An Online NewsHour interview provided in text, as well as both streaming video and audio.

    Stock Market Crash
    The companion site to the PBS program "The First Measured Century" explains briefly how the stock market crashed in 1929.

    Text of the 1933 Securities Act and the 1934 Securities Exchange Act
    The University of California provides the text of these acts, the Investment Company Act of 1940, and a link to the Sarbanes-Oxley Act of 2002.

    U.S. Securities and Exchange Commission
    The official Web site for the SEC, providing extensive information to the public in its effort to protect investors and the integrity of the securities market. Resources include the EDGAR database of company disclosure statements, an overview of the SEC's responsibilities and structure, and much more.

    Who Dropped the Ball?
    A FRONTLINE primer on the responsibilities of corporate watchdogs, including corporate boards, auditors, investment banks, lawyers, etc. This resource is part of an in-depth report on corporate scandals.

    About the Author
    Cari Ladd is an educational writer with a specialty in secondary Social Studies. Previously, she served as PBS Interactive's Director of Education, overseeing the development of curricular resources tied to PBS programs, the PBS TeacherSource Web site, and online professional development services for teachers of mathematics and science. She has also taught in Maryland and Northern Virginia.

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