Inside view of Sarbanes-Oxley: an interview with Rep. Mike Oxley.

• Position: Cover Story

Rep. Mike Oxley (R-Ohio) is more than just the cosponsor of the Sarbanes-Oxley Act of 2002, the most significant piece of business legislation since the Securities Act of 1934. He is an eleven year member of the U.S. Congress, chair of the powerful House Financial Services Committee, and respected leader in his party.

A fiscal conservative dedicated to reducing spending, Oxley has played key roles in many important pieces of legislation. But it is the act bearing his name that made him a topic of water cooler discussions. He is uniquely positioned to give an inside view on the forces that converged in 2002, how the Sarbanes-Oxley Act is being implemented, and the mindset of Congress relative to the regulation of the accounting profession.

Catalyst editorial staff spoke with Oxley during a luncheon held in his home town of Findlay on Dec. 8, 2004. The topic of discussion--Sarbanes-Oxley and how it's being implemented.

What factors created the environment and the need for Sarbanes-Oxley?

During our committee hearings--which were the first hearings on the Enron situation in either the House or the Senate--I learned a lot about the system to which we had become accustomed. There were some very serious flaws relating to business ethics, accounting practices and failing to be transparent. There were people trying to accumulate as much wealth in as little time as possible. Companies were trying to meet ever demanding quarterly goals set by analysts, the media and the like. I think that is what drove these folks to such extremes.

Why is consumer confidence so important?

We've changed from a nation of savers to a nation of investors. When I was first elected to Congress in 1981, 19 percent of American households owned stock. Today it is 54 percent--well over half. They are individual investors, they have mutual funds--95 million Americans own mutual funds--they have 401(k)s, they have IRAs, they are trading on the Internet. As we become this nation of investors, people rely more and more on hopefully good information about what is a good investment.

Our efforts in crafting this legislation were all about accountability and transparency so that the average investor can get back into the marketplace. We lost $7 trillion in market cap during the Enron/WorldCom crisis. That is nearly the total gross domestic product of the entire European Union.

The Sarbanes-Oxley Act was passed at a time when confidence in corporate America and auditors was severely challenged. How would you characterize the bill that Congress passed?

The bill had passed the House and had just...