Looking Back and Looking Forward: Sarbanes-Oxley and the Future of Corporate Governance

53 Pages Posted: 27 Mar 2007

Abstract

Corporate governance has received significant media attention over the past few years. From the spectacular bankruptcies of Enron and WorldCom to the white-collar criminal trials of Kenneth Lay, Martha Stewart, and Bernie Ebbers, Americans watched Corporate America hit one of its lowest points. Fraud, self-dealing and deception, among other "worst practices," seem to have become widespread.

The Sarbanes-Oxley Act was passed in 2002 in reaction to those corporate scandals, but its future is now uncertain. All debates hinge on two fundamental assumptions: that business leaders and regulators are natural enemies and that one of those groups must be "right" and the other "wrong" in this new climate of oversight and regulation.

Instead, we argue that the groups should recognize a common goal - a competitive, ethical corporate culture - and work collaboratively toward it, a situation that benefits both businesses and government. Indeed, honest companies are one of the first casualties of corporate malfeasance, and fewer enforcement actions mean fewer government resources expended. We suggest several areas where this type of collaboration might work, point to successful instances of such collaboration, and identify areas for future development in the area of corporate governance.

Every year, academics, business leaders, and a chorus of others grumble about regulation in general and Sarbanes-Oxley in particular. Yet the progression of scandals has continued unabated, from aggressive accounting to tax shelters to backdated options. Surely, markets must be allowed to work; however, the practical question and the policy question is how best to make markets work for the benefits of all Americans, not just those who hold the money and the power.

Recent corporate debacles are simply one in a pattern of failures of leadership in American institutions. By aggressively acting to create an ethical, competitive corporate culture, business leaders can be among the first to reverse that tide.

Keywords: corporate governance, Sarbanes Oxley, corporate law, business law, finance, capital markets, markets, regulation, public policy, legislation

Suggested Citation

Harshbarger, Scott and Jois, Goutam U., Looking Back and Looking Forward: Sarbanes-Oxley and the Future of Corporate Governance. Akron Law Review, Vol. 40, p. 1, 2007, Available at SSRN: https://ssrn.com/abstract=974758

Scott Harshbarger (Contact Author)

Proskauer

One International Place
Boston, MA 02110
United States

Goutam U. Jois

affiliation not provided to SSRN ( email )

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