High-flying executives and bankers are damaging the market by continuing to see themselves as above the law, according to the New York State Attorney General, Eliot Spitzer.

Mr Spitzer, who was addressing MBA students on corporate governance issues at Smurfit School, UCD yesterday, said this "masters of the universe" complex was fuelled by a lack of action on behalf of shareholders and a gradual decline in ethical standards in business.

"Shareholders have three options. They can pull out and sell up, loyally acquiesce with the decisions of the board of directors, or exercise their voice," he said.

"The first two are the most frequent but the last one is the most important. Criticism is better than plaudits, and it's vital that shareholders are willing to be proactive, to step up to the plate and say 'you're wrong' to the board.

"Unfortunately it is more likely to be long-term investors who will do that and the current trend is towards shorter holding periods. Investors are more likely to look for a short-term gain or loss and, therefore, less likely to speak up.

"In addition, if you look at the proxy rules, there are so many hoops and hurdles in the way that shareholders are discouraged to disagree," said Mr Spitzer.

Senior management were equally to blame for the malaise, he said, pointing to the phenomenon of "Groupthink", where executives tend to fall into a common policy of agreement, rather than take individual stances: "People don't like to be seen as being against management but failure to be involved means that management goes unfettered and that will lead to lower returns across the market."

During his tenure as Attorney General, Mr Spitzer has gained a reputation as a guardian of integrity on Wall Street due to his prosecution of several high-profile companies for fraud and corruption, including Merrill Lynch and insurance giants Marsh & McLennan and AIG.

He stated that simple concepts such as honesty and transparency could be reintroduced using simple methods. "I believe we have enough regulations, so go out and use what you have.These are fundamental violations and we don't need to create more and more laws to deal with them."

Mr Spitzer also insisted that integrity led to a better business model and the companies that he had investigated had ultimately benefited.