The Pros And Cons Of The Sarbanes-Oxley Act

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After the Enron debacle and the WorldCom disaster, Congress decided to enact legislation that would help to protect investors and improve the accuracy of corporate financial statements. The new legislation would be called the Sarbanes-Oxley Act (SOX). This legislation was a major turning point at the time it was passed. This gave investors renewed confidence and made many corporations angry due to the excessive compliance costs. With the new legislation in place many people thought that this might prevent any major scandals in the future. Even though the Sarbanes-Oxley Act created more regulations and made corporations comply with stricter guidelines, it was unable to stop the 2008-2009 financial crisis. The Sarbanes-Oxley Act required …show more content…
The benefits of the Sarbanes-Oxley Act are that it created greater accountability by top management and board of directors to employees (Thorne, O. Ferrell, & L. Ferrell, 2011, p. 156). The greater accountability will force a business to provide an investment to the stakeholders rather than collect excessive compensation and other benefits (Thorne, O. Ferrell, & L. Ferrell, 2011, p. 156). The renewed investor confidence provides managers and brokers with the information to make solid investment decisions, which will lead to a more stable growth rate for investors (Thorne, O. Ferrell, & L. Ferrell, 2011, p. 156). CEO compensation packages will be explained and all of the extra perks and officer loans will go away (Thorne, O. Ferrell, & L. Ferrell, 2011, p. 156). Employee retirement plans will be better protected that way employees can trust that they will not lose their savings tied to such plans (Thorne, O. Ferrell, & L. Ferrell, 2011, p. 156). Stock analysts and rating agencies will have improved information (Thorne, O. Ferrell, & L. Ferrell, 2011, p. 156). Senior managers, auditors, and board members will have greater accountability with stiff penalties if laws should be broken (Thorne, O. Ferrell, & L. Ferrell, 2011, p. 156). The Sarbanes-Oxley Act legislation was the start to tougher regulations and more compliance of public corporations. The latest financial crisis in 2008-2009 proves that we need strict regulations and better oversight from the

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