Sarbanes-Oxley has limited impact because its penalties are relatively weak when compared to other statutes, says Lisa Nicholson, Associate Professor of Law at the University of Louisville.

In her paper, The culture of under-enforcement: buried treasure, Sarbanes-Oxley and the corporate pirate, she argues that the Act is weak. She says tough asset forfeiture sanctions are needed to make it more of a deterrent.

She says there are laws that allow the seizing of illicit proceeds in the fight against drugs, insider trading, organized crime and bank fraud. So why not in Sarbanes-Oxley? And because it's not there, she says, it means the Act is less of a deterrent to wrong-doing.

"The ability to return to the lifestyle once led (purchased with funds fraudulently obtained from their former corporation) should be eliminated,'' she writes. "While corporate offenders may be willing to reconcile the prospect of spending some time behind bars for the sake of an exponential payout, the prospect of giving up one's personal freedom without some tangible benefit in the end will change the deterrent equation."

According to Nicholson, the problem is that Congress authorized the forfeiture of executive bonuses under SarbOx section 304 where certain bonuses and profits are forfeited. But, she says, it should have gone further. For a start, it refers only to the bonuses and not the salaries purportedly earned. And secondly, it might result in CEOs and CFOs being more reluctant to restate financials.

"Such inaction could lead to greater losses to investors who are ignorant of simmering problems within the corporation. Moreover, it is unclear from the language of the statute who can sue to enforce the claw back provision. Can investors sue on behalf of the corporation to make the CEOs and CFOs return the funds to the corporation? Finally, it is also unclear from the language of the statute whose misconduct will trigger the disgorgement, and even what is the nature of the misconduct that will serve as the trigger."

9 Oct 2007