Sarbanes-Oxley Act

Only available on StudyMode
  • Download(s) : 241
  • Published : April 10, 2012
Open Document
Text Preview
Sarbanes-Oxley Act
Dana Smith
December 6, 2011
Michelle Hamilton

Sarbanes-Oxley Act
In the corporate world today the rules and regulations are stricter than they were in early 2000. The development of corporate governance that established procedures to be used by officers and directors for lines of responsibility, approval, oversight by key stockholders, and set the rules for corporate decision making became more extreme. The Sarbanes-Oxley Act (SOX) of 2002 made the use of ethical decision making more prominent in today's business environment. The SOX Act established the penalties for both criminal and civil charges as well as those in the corporate world are not protected. The term "piercing the corporate veil" become a household phrase thanks to Bernard Ebbers, former WorldCom boss. In 2005 Bernard Ebbers was sentenced to 25 years in prison, one of the toughest sentences imposed on an executive, for overseeing the $11 billion WorldCom Fraud. Three years earlier the fraud came to light reducing the shares of stock worth more than $50 to a few pennies. This was not a minor fraud. Ebbers committed a fraud that caused investors to suffer huge losses. Ebbers was charged with conspiracy and securities fraud, and seven counts of filing false statements to securities regulators. The judge in the case did not seek restitution ore impose fees because Ebbers had forfeited nearly all his personal assets to settle a civil trail filed by the distressed investors.

With the SOX Act a law, public companies are required to establish a code of ethics and conduct. Officers and directors are now ethically obligated to disclose their own buying and selling of company stock. Companies must comply with the code of ethics disclosure requirements in annual reports of the fiscal year affairs. There are three ways a company can file the code. They can file it as an exhibit to the annual report, post the code on the company's website, or...
tracking img