The Unfulfilled Promise of Sarbanes-Oxley Section 304: A Call for Pervasive Enforcement

In the early 2000's, the financial markets were devastated by a series of highly publicized corporate accounting scandals' at companies such as Enron, Adelphia Communication, WorldCom, and Tyco. A common thread among these scandals was the numerous instances where corporations had publishe...

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Bibliographic Details
Published in:DePaul business & commercial law journal 2015-10, Vol.14 (1), p.49
Main Authors: Fichtner, J Royce, Rozycki, John, Heaston, Patrick
Format: Article
Language:English
Subjects:
Corporate officers
Corporate responsibility
Financial statements
Public Company Accounting Reform & Investor Protection Act 2002-US
Scandals
Securities markets
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Summary:In the early 2000's, the financial markets were devastated by a series of highly publicized corporate accounting scandals' at companies such as Enron, Adelphia Communication, WorldCom, and Tyco. A common thread among these scandals was the numerous instances where corporations had published glowing financial statements that materially overstated their true financial position. Corporate officers reaped the rewards of the overstated results by receiving large incentive-based bonuses while simultaneously selling their personal shares of stock in the company at higher-than-justified prices. In some instances the restatements triggered a total collapse of the corporation. By the spring of 2002, there was a pervasive push for a governmental response. In March of the same year, President George W. Bush issued a ten-point plan designed to improve corporate responsibility and help protect America's shareholders by providing better information to investors, making corporate officers more accountable, and developing a stronger, more independent audit system.
ISSN:1542-2763