Policy Paper Sarbanes-Oxley

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Final Policy Paper

Examination of Sarbanes Oxley Act

By
Murtaza Moiz
Student ID# 861034573

Ethics and Law in Business and Society
Bus 102
Professor: Dr. Sean Jasso
TA: Tommy

Table of Contents

Abstract Section1

Prologue1

The Past of Sarbanes Oxley Act3

Tracing Implementation of the Bill 5

Tracing the Act’s Implementation7

Impact on Businesses and Societies 9

Pessimistic Impacts10

Optimistic Impacts10

Value of Corporate Social Responsibility11

The Exercise of Friedman vs. Carroll’s Theory13

Policy Examination14

Recommendations15

Wrapping Up16

Appendix Page17

Reference Page19

Abstract Section
I started to think about what type of a Law or a bill I would do for my policy paper, and it dawned on me after a week of thought and brainstorming that my uncle who was a Software Engineer at Enron had gotten laid off. He never likes to talk about it, but knowing that he had lost half of what he had earned in his entire life, was gone in an instant, motivated me to choose Sarbanes Oxley Act as my policy paper. I was unable to speak to my uncle about his previous job at Enron, but keeping in mind how he has become successful again in his life motivated even more. Dr. Jasso had mentioned Sarbanes Oxley Act in class quite a few times, and used it as a key example for his lecture also. I knew the surface of what Enron had done, but did not know a lot about how Sarbanes Oxley Act was related to it. I will start off with a prologue of what the Sarbanes Oxley Act is, and later going in detail about the Act. Prologue

The corporate scandals in the year 2001 of Enron and WorldCom, where Enron was able to produce fake reports of high profits with false accounting methods and WorldCom, who artificially reduced their expenses to falsely increase in the appearance of their revenues, created a market failure. Major stakeholders such as investors, government, regulatory authorities, stock exchanges, citizens and board members just to name a few, were negatively impacted by these fraudulent events. Many investors were becoming fearful and were losing confidence in businesses. Due to this market failure known as the “Meltdown of 2001”, the government had to step in by putting new reforms into place for future avoidances of such major frauds. One of the reforms that were passed by Congress was the Sarbanes Oxley Act. “It is to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.” (First line in Sarbanes-Oxley Act) The Sarbanes Oxley Act intended to bring back protection to investors through a series of laws in order to restore their confidence in the U.S. market in a time where the market was in a desperate need for help. I strongly believe that the implementation of Sarbanes Oxley Act has worked to recapture the confidence of investors and most importantly has brought awareness to the significance of why we need Corporate Social Responsibility for the long-term sustainability of a company. The main objective Professor Jasso wants us to understand is “ the Sarbanes-Oxley Act as a public policy in response to market failure – that is when the market stops providing efficient and ethical solutions to society” (Jasso, 2009, p. 1). This means that he wants us to learn how unethical behavior can cause market failure and how through government regulation a public policy can be created to fix the market; the purpose of this paper is to look more into depth of the actions that led to the creation of the Sarbanes Oxley Act. We will look at why the government had to step into the market and why the Meltdown of 2001 was clear as a market failure. We will also trace the Implementation of the Act by looking at two particular codes and to what agencies it pertains and also how it was passed in congress. Later on my policy paper, will describe the major...
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