Ten years after it was brought in, the Sarbanes-Oxley law, which forces corporate executives to take personal responsibility for the accuracy of company accounts and requires organisations to put in place measures to prevent fraud, is sill provoking debate.
The Financial Times reports that the law has become more embedded in corporate culture and its rules. Companies have set up websites and tip-off phone lines for would-be enforcers. It's now becoming less of a burden for corporations. Indeed, the tougher rules for auditors and corporate boards are one reason the current downturn has uncovered relatively few accounting frauds. The latest big company to be hit by an accounting scandal, Olympus , is listed on the Tokyo Stock Exchange and does not file accounts with the SEC. "The process that came out of Sarbanes Oxley was costly, but it made a contribution to raising standards of corporate governance," Mark Wippell, a partner at Allen & Overy told the FT.
On the other side, there are those who say it's had a bad economic impact. John Berlau, of the free-market-oriented Competitive Enterprise Institute (CEI) says that Sarbox compliance costs the average public company $2.3 million a year and that it couldn't prevent the Lehman Brothers, Countrywide or MF Global scandals. As he writes here, Sarbox did nothing, it was complete waste.
Still, the push for stricter governance will continue with the financial meltdown. As will the debate. Some things just don't change.
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