Sarbane-Oxley Act 2002 and Federal Sentencing Guildelines for Organizations
Ethics and compliance issues are nothing new. The U.S Federal Sentencing Guidelines for Organization instituted in 1991, and now the Sarbane-Oxley Act 2002 are aim to protect shareholders and other stakeholders from corporation misconduct. One of their goals is to require employees to report observed misconduct.
In 2002, after accounting fraud at Enron and WorldCom, Congress passed the Sarbanes-Oxley to establish a system of federal oversight of corporate accounting practices in response to corporate accounting scandals, and restore stakeholders’ confidence. The Sarbanes-Oxley Act requires that corporations take “greater responsibility for their decisions and to provide leadership based on ethical principles”. For instance, the Sarbanes-Oxley Act makes the CEOs and CFOs personally liable for the credibility and accuracy of their companies’ financial statements. The Sarbane-Oxley Act has very specific sections regard to ethics and compliance for public companies. For examples, the section 301 requires that “the audit committee to establish procedures for the receipt, retention, and treatment of complaints, including confidential and anonymous submissions by employees received by the issuer regarding accounting, internal accounting controls, or auditing matters”. And the Section 406 requires that “companies to institutes a code of ethics for senior financial officers, and provides minimum requirements for the code”. It forces organizations a set of values that must make up a portion of the company’s culture, which meant to provide insight into the character of an organization, the ethics and level of openness. Also, section 806 requires certain “whistleblower protections” for individuals who provide information or assist in investigations that related to suspected unlawful behavior within the company. The Sarbane-Oxley Act intends to “motivate employees through whistle-blower...
References: C., O., John Fraedrich, and Linda Ferrell. Business Ethics: Ethical Decision Making and Cases. South-Western Pub, 2010. Print
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