Pros and cons of Sarbanes-Oxley
Supporters of the law argue that the financial markets haven’t been shaken as badly by fraud as they were before Sarbanes-Oxley was passed. A 2007 survey by Financial Executives International, a trade organization for corporate leaders, found a majority of companies surveyed agreed that financial reports had become more accurate and reliable since the law took effect.
The law, which passed with overwhelming majorities in the U.S. House of Representatives and Senate, has also won praise from former Federal Reserve Board Chairman Alan Greenspan, who said Sarbanes-Oxley has “reinforced the principle that shareholders own our corporations and that corporate managers should be working on behalf of shareholders.”
Other libertarian-leaning politicians, however, have been less complimentary, arguing that the regulations have caused U.S. firms to flee for foreign stock markets. A Chicago law firm study claimed the regulatory burden on publicly traded companies with annual revenues less than $1 billion soared by $1.6 million in the wake of the law’s passage.
Critics of the law also have noted that financial fraud was illegal before SOX was passed, and that the new requirements would do little to deter any company officials that already intended to defraud their investors.
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