Comment: mixed signals a year after Sarbanes-Oxley.BEFORE blowing out the candle marking the first birthday of the Sarbanes-Oxley Act See SOX. , Corporate America should ponder its wish, considering all that has transpired since the legislation was enacted in July 2002. Securities lawyers may owe Sen. Paul Sarbanes Paul Spyros Sarbanes (Greek: Παύλος Σπύρος Σαρμπάνης) (born February 3, 1933), a Democrat, is a former United States Senator who represented the state of Maryland. and Rep. Mike Oxley Michael Garver "Mike" Oxley (born February 11, 1944) is an American politician of the Republican party who served as a U.S. representative from the 4th congressional district of Ohio. the biggest anniversary gift of all, given the full-employment mandate their legislation has created for them on Corporate America's dime, as executives try to understand and comply with the most comprehensive financial reporting regulations in this country's history. There have been additional beneficiaries. Plaintiffs' lawyers have seized on the opportunity that Sarbanes-Oxley has created for them as private "attorneys general" protecting shareholders and generating nice-sized fees. The media have also plugged into the gold rush, beating witness to dramatic public floggings of some of this nation's most prominent chief executives. Investigative journalists have roamed the country like an impassioned posse, looking to undercover the next Enron. However, unanswered in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of this hullabaloo is whether and to what extent the public has benefited. Understanding the implications of the cause-and-effect relationship that gave rise to Sarbanes-Oxley seems to hold the answer. Sarbanes-Oxley was a predictable response to a breach of public trust. History is replete with examples of the flurry of activity that almost accompanies such bold transgressions. The infamous Love Canal Love Canal, section of Niagara Falls, N.Y., that formerly contained a canal that was used as chemical disposal site. In the 1940s and 50s the empty canal was used by a chemical and plastics company to dump nearly 20,000 tons (c. case, for example, is cited as the catalyst for creating millions of pages of environmental rules and regulations that spanned the '70s, '80s and '90s. But while we all have benefited from a cleaner environment, such laws did little to restore public trust in companies like Occidental Petroleum Occidental Petroleum Corporation ("Oxy") NYSE: OXY is an international oil and gas exploration and production company with operations in the United States, Middle East/North Africa and Latin America regions. , a substantial contributor to the pollution. The takeaway is that Sarbanes-Oxley is not a mechanism for restoring confidence in some of our nation's corporations. The act responded to a symptom, not a disease. In the wake of this wide-scale breach of public trust, corporations are well advised to view the issue holistically. This is an exercise of inclusiveness and transparency. As companies develop and improve their corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental , they should integrate broader objectives that transcend the balance sheet. They must look at all stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. and address the issues of trust that matter most to each. Real reform and trust-building can only be done through careful analysis and with the internal resolve to develop governance policies and procedures that exceed the credibility of corporate reporting systems. Let's remember that compromised corporate integrity--not inadequate legislation--was really the driver of Sarbanes-Oxley. Corporate America should be blessed with the wisdom to understand the difference. Eric Borsum is a senior vice-president at Hill & Knowlton Inc. and leads the firm's Corporate Social Responsibility initiative. |
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