An Aristotelian Perspective
Chapter 2: Corporate Governance by Box Ticking
I SARBANES–OXLEY AND ENRON: IS THE REMEDY WORSE THAN THE DISEASE? The Sarbanes–Oxley Act, also known as the Public Company Accounting Reform and Investor Protection Act (Pub.L.No. 107-204, 116 Stat. 745), became eﬀective as United States federal law on 30 July 2002. This law was meant primarily to protect investors by improving the accuracy and reliability of corporate disclosures. At the law’s signing, President George W. Bush aﬃrmed that it contained ‘the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt’ (Bush, 2002), in clear allusion to the New Deal of the 1930s. ‘This law says to every dishonest corporate leader: you will be exposed and punished, the era of low standards and false proﬁts is over; no boardroom in America is above or beyond the law’ (Bush, 2002), continued the President with rhetorical ﬂourish. Sarbanes–Oxley consists of 11 sections or titles: one establishes the Public Company Accounting Oversight Board (PCAOB), two speciﬁcally create tough criminal penalties for executives committing fraud or issuing misleading information and several more cover areas such as auditor independence, corporate responsibility, ﬁnancial disclosures, analyst conﬂicts of interest, and corporate and criminal fraud accountability. Sarbanes–Oxley also updates and amends provisions from the Securities Exchange Act of 1934, the Employee Retirement Income Security Act of 1974 and the Federal Corporate Sentencing Guidelines. Among Sarbanes–Oxley’s major provisions we ﬁnd the certiﬁcation of ﬁnancial reports by chief executive oﬃcers and chief ﬁnancial...
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