One view on the value of Sarbanes-Oxley.

• Author: Hollein, Marie N.
• Position: FROM THE PRESIDENT - Legislation

The landmark Sarbanes-Oxley Act of 2002 turns 10 on July 30. Like most 10-year-olds, it has delighted some and infuriated others. But one thing is certain--regardless of the personal attitudes financial executives may hold--the law has become an essential part of America's business landscape.

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Few pieces of business legislation have had the impact on companies and their management teams as this law. Its Sections 302 and 404, among other tenets of the legislation, have transformed the financial reporting and audit processes of public companies and their focus on internal control, making financial executives more accountable--professionally and personally--for the veracity of their company's financial reports. Certain provisions of the law have also had a trickle-down effect on private companies.

On balance, it seems evident that Sarbanes-Oxley has been good for the financial community and investors overall. It's no secret that, in some cases, companies had become complacent, less vigilant in their financial reporting and oversight, and worse. The most egregious examples come quickly to mind--Enron and World-Com, among others. In too many high-profile cases, the depth and quality of financial review was lacking in the years prior to the Enron Corp. scandal, setting in motion those factors that led ultimately to passage of the reform legislation.

The law introduced important internal review procedures and controls to the job of financial reporting. Even ardent supporters acknowledge they were costly and time-consuming, and the vast majority of financial executives who conduct themselves with unimpeachable integrity could be excused for grousing about a regulation many regarded initially and still regard as overkill.

There have been periodic attacks against the law over years, including legal challenges to the Public Company Accounting Oversight Board created by Sarbanes-Oxley. But by and large, the law has withstood attack and, with key improvements in related rulemaking, is an accepted part of the financial reporting and audit functions.

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