Federalized Corporate Governance: The Dream of William O. Douglas as Sarbanes-Oxley Turns 20

Abstract

The federalization of U.S. corporate governance has been a topic of conversation among policymakers from the very beginning of the federal securities laws in the New Deal era. Among the early proponents of a federalized system of corporate governance oversight was William O. Douglas—perhaps best known as the longest-serving U.S. Supreme Court justice, but who also was a former commissioner and chair of the U.S. Securities and Exchange Commission. Reflecting on Douglas’s federal corporate governance ideas, Professor Roberta Karmel wrote a law review article for the Delaware Journal of Corporate Law, published in 2005, commenting on the extent and nature of federalized corporate governance in the wake of the enactment of the Sarbanes-Oxley Act of 2002.

This essay effectively picks up where Professor Karmel’s article leaves off, highlighting a number of key legal happenings since the adoption of Sarbanes-Oxley that extend and supplement the work accomplished by that landmark federal securities legislation in forwarding federalized corporate governance. The essay also offers related observations about the future of federalized corporation governance. In the main, however, the essay is a tribute to Professor Karmel—a personal and professional heroine in my life who, as it turns out, was researching and writing about the federalization of corporate governance at the same time I was, but from a different angle. The structure of the essay parallels key aspects of Professor Karmel’s 2005 article.

Keywords: Sarbanes-Oxley, corporate governance, federalization, William O. Douglas

JEL Classification: G18, G38, K20, K22, M10