President Bush, Sen. Paul Serbanes, and other
ddignitaries meet in the Blue Room prior to signing
the Sarbanes-Oxley Act.
July 30, 2002: The Sarbanes-Oxley Act is signed into law by President George W. Bush. Senator Paul Sarbanes, a Democrat from Maryland, and Representative Michael G. Oxley, a Republican from Ohio, co-sponsored the bill. The bill passed the House with a vote of 423-3 and the Senate with a vote of 99-0. The law established new or enhanced standards of US public company boards, management, and public accounting firms. It contains 11 titles or sections and does not apply to private companies. Being a public company means it is registered on the stock exchange, i.e. public.
At the beginning of the millennium, there were many highly publicized business irregularities. Enron, WorldCom, Tyco, Adelphia, and Peregrine Systems showed the nation and the world the sleazy side of business in a big way. The boardroom failures, auditor conflicts of interest, the securities industry's conflict of interest, irregular banking practices, bursting the Internet bubble, and obscene executive compensation lost billions of investor dollars both at home and abroad.
The law established an oversight board with nine different sections specifying what to oversee. Auditor independence and corporate responsibilities were spelled out. Enhanced financial disclosures were defined, including off-balance-sheet transactions. Analyst conflicts of interest were addressed to help restore investor confidence. The commission's resources and authority along with studies and reports were delineated. Corporate and criminal fraud and white collar crime were addressed with penalties increased for infractions. Corporate tax returns and accountability were defined and penalties made explicit.
Proponents claim the law was sorely needed and has helped to restore investor dollars to the markets. Detractors say that the costs of compliance reached $5.1 million per Fortune 500 company in 2004 alone. They claim the regulations stifle creativity, especially in small start up companies in the technology sector. Other countries, including Canada, Japan, Australia, France, Italy, and South Africa have similar laws on the books with amounts of strictures and penalties involved for corporate malfeasance spelled out.
"Morale is faith in the man at the top." – Albert S. Johnstone
"All men's gains are the fruit of venturing." – Herodotus
"The morale of an organization is not built from the bottom up; it filters from the top down." – Peter B. Kyne
"If you can build a business up big enough, it's respectable." – Will Rogers
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