A Social Defense of Sarbanes-Oxley

Abstract

In this essay, I argue that the scandals leading to Sarbanes-Oxley and the resulting rapid and powerful backlash against it arose because of the prevalence of the self-interest ideology in business, finance, and indeed, U.S. society, which views individuals solely as profit-maximizers. Sarbanes-Oxley is fundamentally a reassertion of social values against the socially destructive aspects of the self-interest ideology. I provide several examples of the law's social orientation, which require professionalism in the boards of directors of public companies and in the research analysts in investment banks. I also observe that changing the ideology of executives and financiers will likely require more than the legal reforms offered by Sarbanes-Oxley. Yet, this law's contribution to an alternative, more pro-social perspective and its practical reforms are grounds for its defense.

Keywords: Sarbanes-Oxley, regulation of business