SOX Act of 2002
SOX Act of 2002
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, which he characterized as "the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt." The Act mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud, and created the "Public Company Accounting Oversight Board," also known as the PCAOB, to oversee the activities of the auditing profession. (Securities Exchange Commission, 2014) Over the years, there have been multiple fraud cases involving businesses’ accounting practices. Some of ...view middle of the document...
(Fass, 2003) This group monitors the activities of accounting firms. Originally the board was put into place to set and enforce some standards that protected the public from malicious accounting practices, but in 2009, the non-profit organization by the name of The Free Enterprise Fund brought a case to the federal Supreme Court that weakened the authority of the PCAOB. Under the Sarbanes–Oxley Act, officers of the Public Company Accounting Oversight Board (PCAOB) enjoyed dual layers of "for cause" protection against Presidential removal. PCAOB officers could be removed only "for good cause shown" by officers of the Securities and Exchange Commission, who in turn could only be removed by the President for "inefficiency, neglect of duty, or malfeasance in office." These dual layers of limitation on the President's ability to remove PCAOB officers led to separation-of-powers violations. PCAOB officers exercised Executive-branch powers by determining policy and enforcing the laws of the United States. (Wikipedia, 2013) In 2010 the Free Enterprise Fund won and what this did was give the president unrestricted power to remove officers. Ultimately, what this does is subject enforcement and new regulations to whatever the political climate is at the time. The Free Enterprise Fund just happens to be a right leaning political organization that describes itself as the preeminent force in Washington for the passage of legislation that promotes economic growth, lower taxes, and limited government. The Fund advances these goals through: TV and radio issue advertising campaigns, providing timely and tactical policy guidance to members of Congress, and publishing strategic game plans on vital economic and fiscal issues. (NNDB, 2012) What the opposite looks like here is an oversight board that could either tighten up regulations on the corporations and make it harder for political influences to interfere, or an oversight board that has officers that are very difficult to remove amidst a scandal if the corporation had an inside person as an officer. Also, what happened here is that it weakened the ability of the oversight board to introduce new regulations that were neutral and not favorable towards corporations. The same goes for enforcement too.
Another issue where the SOX act faces is the interpretation of what protections is given to employees of privately owned firms who cooperate with investigations and are fired by the firms for their cooperation. In this case the Supreme Court had to decide whether Section 806 of the Sarbanes-Oxley Act protects an employee of a privately held company from retaliation. In theLawson v FMR LLC case, NFIB’s amicus brief argued that the Sarbanes-Oxley Act was never intended to apply to privately held companies and that imposing the Sarbanes-Oxley whistleblower protections on private companies would have added unbearable costs and regulations to small businesses. However, the Court held that whistleblower protection extends...