Sarbanes-Oxley: Effective Governance?
Introduction
On December 2, 2001, less than a month after it admitted accounting errors that inflated earnings by almost $600 million since 1994, the Houston-based energy trading company, Enron Corporation, filed for bankruptcy protection. With $62.8 billion in assets, it became the largest bankruptcy case in U.S. history, dwarfing Texaco's filing in 1987 when it had $35.9 billion in assets. The day Enron filed for bankruptcy its stock closed at 72 cents, down from more than $75 less than a year earlier. Many employees lost their life savings and tens of thousands of investors lost billions. Who is to Blame? That is what at least a half-dozen Congressional Committees, the SEC, the U.S. Justice Department, and an investigative panel appointed by Andersen LLP set out to unearth. Regardless of blame, it was clear that changes needed to be made to protect the employee, who literally puts his or her life in the hands of their employer. The Sarbanes-Oxley Act of 2002 was enacted by elected policy-makers, in an attempt to deter the reoccurrence of Enron and govern the ethical behavior of Corporate America.
The Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002, (SOX), was signed into law on July 30, 2002 by President Bush. Considered to be one of the most significant changes to securities law since the 1934 Securities Exchange Act, SOX calls for new procedures to fight accounting fraud and an array of new penalties to protect the employee from unethical behavior within the corporation. Currently, provisions of the Act are being enforced by the Securities and Exchange Commission (SEC), which has been responsible for setting the rules and parameters. ...