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How Has Sarbanes-Oxley Affected Corporate Culture?

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granny54 | Student, College Freshman | Valedictorian

Posted May 21, 2013 at 6:26 AM via web

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How Has Sarbanes-Oxley Affected Corporate Culture?

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Ashley Kannan | Middle School Teacher | (Level 2) Educator Emeritus

Posted May 21, 2013 at 10:29 AM (Answer #1)

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I would say that the Sarbanes- Oxley Act has helped to make corporate culture more transparent than it was prior to the legislation being enacted.  The veil of secrecy that existed in corporate culture echoed the corporate raider culture of the 1980s.  In this realm, it is "anything goes" in terms of making money.  This was evident in the culture of Enron and Arthur Anderson, where market to market accounting practices essentially fictionalized profits.  The corporate culture was one in which auditors were left to trust CFOs and CEOs who sought to generate more profit and create an atmosphere where questions were not encouraged.

Certainly, more work still needs to be done.  Yet, I think that the Act has helped to create a demand for accountability and transparency in the business culture.  Consider the reports of Paul Sarbanes, himself, in recalling how he has heard of changes in corporate culture as a result of the bill that he co-sponsored:

Sarbanes added that he thought SOX had also improved communication between auditors and executives. He told a story of a man who approached him and lauded the bill. Sarbanes was skeptical because he was used to hearing criticism, so he asked the man what he did for a living. The man was an internal auditor. “Before your bill came along, if I wanted to see the CEO or CFO, I could never get in to see them,” Sarbanes recalls the man saying. “… Now, since your bill, any time I want to see them, I walk right into their office.”

In addition to this, one has to recognize that other countries have passed similar legislation demanding greater accountability of publicly held corporations.  There has been a significant impact that the Act has had on other nations in terms of demanding accountability from corporations and fostering a greater transparency in corporate culture.

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