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Ethics, Essays

The Sarbanes-Oxley Act

The Sarbanes-Oxley Act

Owing to the occurrences of scandals in the financial institutions that cost the public their hard-earned cash, instituting SOX was meant to restore sanity in this sector. Corporate self-regulation was not working for the firms involved in financial scandals, and thus, setting up a law that made sure that the public interest in these firms came first was a noble idea. Laws, regulations, and disciplinary actions were also required so that the rogue board of directors that acted in self-interest could be tamed (Weiss, 2014, pp. 22-23). To a large extent, SOX brought the sanity needed in this sector until other laws were introduced to weaken it. The purpose of SOX was to bring transparency to the financial sector, and it succeeded. The oversight, enforcement of truth, accuracy, and accountability in financial reporting for public firms had to be ensured by setting regulations by the federal government. Despite these achievements in sanitizing the financial sector, SOX became increasingly unpopular due to the weakening of small firms (Romano, 2009, pp. 233-234).

From the experience in the lead-up to the 2008 financial crisis, it is evident that laws and regulations are pivotal in ensuring ethical business standards are maintained. Allowing the management so much leverage in setting ethical cultures in their firms leaves loopholes in the way organizations run their affairs. This way, transparency in financial disclosures is not guaranteed, as struggling companies would still want to appear to have footage in the business so as not to scare away potential investors. As such, having financial regulations hinged in the law like the SOX is crucial in ensuring ethical practice in the business.

References

Romano, R. (2009). Does the Sarbanes-Oxley Act Have a Future? Yale Journal on Regulation, 26(2), 243-341.

Weiss, W. J. (2014). Business ethics: a stakeholder and issues management approach (sixth ed.). Berrett-Koehler Publishers. Retrieved from http://ebookcentral.proquest.com

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Question 

The Sarbanes-Oxley Act

Chapter 4 of your course text discusses the Sarbanes-Oxley Act (SOX).

The Sarbanes-Oxley Act

The Sarbanes-Oxley Act

For this discussion, address the following:

  • Consider whether the implementation of the SOX supports ethical behavior. Specifically, address Title 3 of SOX and whether you think SOX was effective for financial institutions in the recent financial crisis.
  • Discuss, based on your experience, whether you think regulations work to maintain an ethical environment, or whether people are the central drivers of creating ethical cultures. Explain your reasoning.
    Refer to the Discussion Participation Scoring Guide for posting expectations.