Much controversy exists about the Sarbanes-Oxley Act (the “Act”) of 2002. Enacted into law by then-President George W. Bush on July 30, 2002, the Act had been heralded as a gigantic step toward reforming the ills of unethical conduct that plagued major corporations after the collapse of Enron, Worldcom, and Tyco. Ten years later, the Act has become one of the most debated issues in MBA schools and, now, in the current presidential race.
The magnificent highlight of the law was to shed daylight on mischievous corporate behavior in various arenas. There was too much activity going on behind the scenes and the Security Exchange Commission seemed to allow these issues to go unnoticed. A plethora of problems blew up and got out-of-control. President Bush’s response to the public’s demand for greater accountability by publicly traded organizations was to clamp down on corporate responsibility, accounting, and auditing. The Act imposed stricter regulations on how corporations do business through regulations in each of these areas except for tax compliance.