Corporate governance

Corporate governance refers to the way a corporation is managed, administered, and controlled by the various stakeholders. The stakeholders such as the shareholders, boards of directors, and managers run the corporation and shape and execute the strategies and day-to-day operations. The other stakeholders such as employees, customers, suppliers, regulators, and society at large are also interested in proper management of the corporation. The objectives of good corporate governance include economic efficiency and maximization of shareholder value and may include other goals as assigned by the regulators and the society.

The term corporate governance appeared in 1981, and the topic has become a subject of intense research, especially in the last decade. However, even with such a focus, no single definition of corporate governance suffices to serve the purposes of all stakeholders. Corporate governance has been in part defined by various regulations and in part by the human element involved in operationalizing the term. In order to achieve the objectives of good corporate governance the shareholders, boards of directors, and managers need to be honest, trustworthy, and respectful of the letter and spirit of the law. Sometimes demands of the various stakeholders can conflict, giving rise to complex and thorny ethical dilemmas. Thus, the topic is of interest to all of us.

Why Corporate Governance Is Important

To understand the importance of corporate governance, we must first understand the nature of a corporation and the far-reaching influence wielded by today’s corporations. The corporate form for conducting business has gained international popularity. Why? The simple reason is that a corporate form of business offers limited liability to the owners of a corporation. For example, if the owners put $100 in the corporation (buy shares) and the corporation goes bankrupt, then the owners lose only $100. However, if the business is run as a sole proprietorship (single owner) or as a partnership, then the owner(s) can be responsible for all debts incurred by the company and may even lose personal assets such as a house or car. This legal protection offered by the limited liability concept results in risk taking and innovation. Today’s corporations are owned by thousands of investors who pool their money and delegate the running of the company to professional managers. The people invest and the managers manage, and, if both are successful, everyone reaps the rewards. Some legal scholars have put the idea of corporate form at par with industrialization as a force that helped drive the explosive growth of business and commerce.

However, because owners generally have no direct hand in running a corporation, there is a possibility of mismanagement by the managers; in other words, bad corporate governance can ruin the investors. This is often referred to as an agency problem. What is to stop the managers (agents) from running the company for their own benefit (to the detriment of owners)? This question becomes even more urgent if we scrutinize today’s global corporation. Presently, in the United States and across the world, the economic landscape is dominated by global corporations; many of them rival governments in terms of their budgets and power. Any major mistake by the mangers of such a corporation can affect the economies of nations as well as the lives of the common people. The world faced a major economic crisis in 2008–2009 when U.S. banking and investment firms used faulty models in measuring risks in the housing market. As this article is being written, the ecosystem of the Gulf of Mexico is being threatened because of mishaps with offshore oil drilling. The livelihoods of millions of people are at stake.

Legislation	Reason
Owens-Glass Act of 1913: This act provides rules for financial reporting and reserve requirements for banks.	This act was enacted due to bank failures caused by inadequate or nonexistent reserves.
Glass-Stegall Act of 1933: This act separated commercial and investment banking.	There was a conflict of interest in banks that conducted commercial and investment operations, which resulted in massive banking frauds.
Securities Act of 1933: This act requires disclosure of all important information before securities (shares) are registered.	Shares were issued by many corporations that provided false and misleading information to the public.
Securities Exchange Act of 1934: This act requires that all companies listed on stock exchanges file quarterly and annual audit reports with the Securities and Exchange Commission.	Many corporations issued unaudited fraudulent financial reports and manipulated their stock price for the benefit of the top management.
Investment Company Act of 1940: This act established financial responsibilities for directors and trustees of investment companies (the companies that invest in stock markets). It also made disclosure of fi nancial and managerial structure mandatory.	Investment companies abused the funds provided by the investors by investing in related companies and manipulating prices.
Foreign Corrupt Practices Act of 1977: This act made proper design, maintenance, and documentation of internal control systems a requirement for U.S. companies.	U.S. corporations were bribing foreign officials for business and also made banned political contributions in the United States.
FIDCA Improvement Act of 1991: This act mandated reports by the managers on internal controls and also compliance with the federal laws.	There was a massive failure of savings and loan institutions due to fraud and conflict of interest among officers and directors.
Private Securities Litigation Reform Act of 1995: This act requires auditors and lawyers to inform the Securities and Exchange Commission of any allegations of wrongdoing (including financial wrongdoing) by the corporation.	This act is intended to prevent frivolous litigation against public companies.
Sarbanes-Oxley Act of 2002: This act strengthens various aspects of corporate governance.	This act was prompted by a series of corporate frauds and failures that involved blue-chip companies in the United States.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: This legislation is aimed primarily at the banking and investment industry; it seeks to make trading in derivatives and other securities more transparent and protect consumers from corporate fraud and mismanagement.	This legislation came in the wake of the 2008–2009 recession, which was caused in part by high-risk and often faulty investment products— primarily mortgage-backed securities—sold by Wall Street firms.

History of Legislation to Prevent Corporate Mismanagement and Fraud. TABLE 1.

Mechanisms of Corporate Governance

The corporate form of business has been abused by managers many times, and a host of laws have been passed as a result. In the United States, each corporation must follow state incorporation laws in forming, running, and dissolving a corporation. Such laws stipulate basic governance structures to protect the interests of the shareholders. Additionally, many other laws have been instituted over the years to foster proper management of corporations. The history of these laws, passed long before corporate governance became a major topic of interest, were designed to prevent mismanagement and fraud by the managers. They can make fascinating reading. The stock market crash of 1929 was partly caused by management fraud or lax corporate governance. Consequently, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. This history repeated itself in 2002, when a host of blue-chip companies that had been certifi ed by their auditors and endorsed by Wall Street were exposed as giant frauds, causing bankruptcies. As a result, the Sarbanes-Oxley Act of 2002 was passed. These laws have directly or indirectly attempted to bolster good corporate governance.

The commonly accepted mechanisms of corporate governance are as follows:

Board of directors: The directors are elected by the shareholders to protect the interests of the shareholders. The directors meet regularly in board meetings and have the power to appoint, remove, and fix the compensation of the top executives. The independent and outside directors are invaluable in monitoring the top management and assessing progress of the corporation.
Checks and balances: The power inside the company is carefully distributed across various positions. For example, the chief financial officer (CFO) is responsible for preparing the financial results of the corporation, the chief information officer is responsible for information technology infrastructure, and the chief executive officer (CEO) provides overall leadership to the company. Such separation of powers is carried down to the lowest levels of the corporation. There is also a carefully designed system of internal controls to ensure reliable financial reporting, increase operating efficiency, and maintain proper compliance with laws and regulations. Such arrangements prevent one person from committing fraud or damaging the corporation through errors of judgment.
External auditors: Every public corporation is legally obligated to get its fi- nancial accounts audited by external auditors. The external auditors have professional responsibilities and are not under the control of top management or the board of directors.
Executive compensation: The board of directors designs the compensation for the top management in such a way that the interests of the top management and those of shareholders will be the same. Thus, top managers’ actions, even though arising from the profit motive, will benefit the shareholders. Good compensation schemes, however, are notoriously difficult to design and often result in unintended consequences.

There are also external forces at work—such as employees, media, financial analysts, and creditors—all of whom may demand good governance and financial transparency. Governmental regulations, as noted above, likewise play a vital role in promoting good corporate governance.

Why Mechanisms of Corporate Governance Fail

The myriad mechanisms of corporate governance are not always enough. Human ingenuity, greed, systemic failure of the markets, and new business innovations can outstrip carefully designed controls. Moreover, accountants who deliver financial reports play a significant role in corporate governance. The performance of top management and of the corporation as a whole is measured by such financial reports. The financial reporting rules in the United States (and in the rest of the world) are flexible and can be interpreted in a variety of ways. These rules can be manipulated—by means of legal stratagems (loopholes) or even by illegal and unethical means—and cause lasting damage to the corporation.

Let us look at a few reasons for the failure of available control mechanisms. First, top management can collude and operate over and above the internal controls of the corporation for management’s own profit. Such unethical behavior generally results in fraudulent financial reporting involving manipulating the accounting data used by the company. Often the external auditors of the company are either complicit in the fraud or choose to ignore it. Eventually, the fraud comes to light and frequently the company goes bankrupt. Second, top management can take excessive risks in the business. Since the bulk of the capital is provided by shareholders, top managers can take risks that they would not otherwise take if their own money were involved. For example, the economic crisis that affected the United States and the rest of the world in 2008–2009 partly resulted from financial instruments that hid the risk of lending money to people who did not have the ability to pay it back. Such risks ended up enriching a handful of managers and corporations but caused trillions of dollars in losses to the nation’s economy. Third, a large corporation can have thousands of shareholders, and most of the shareholders have little time or inclination to study financial reports, attend shareholder meetings, or take an active part in corporate governance. Finally, the top managers control information about the company. Even a vigilant board of directors and a strong body of external auditors can be misled by top managers, if the latter desire to do so.

As a result of these factors, we see in the United States and elsewhere periodic scandals and great swings and crashes in the stock market. In extreme cases, recessions set in, dragging down the national economy. The popular outrage that accompanies such events often forces governments to introduce further regulations. As of this writing (mid-2010), lawmakers in Congress and members of the Obama administration are crafting legislation designed to bolster the nation’s financial regulations. It is expected, however, that the new regulations will complement rather than undo or rewrite the Sarbanes-Oxley Act, which remains the most far-reaching law on the books regarding corporate governance.

The Sarbanes-Oxley Act

In 2000, as the stock market nose-dived and the Internet bubble burst, there was a general discontent among the investors regarding corporate governance. The following year saw a succession of corporate scandals that shocked the public. The biggest fraud involved a company called Enron. This company, based in Houston, Texas, dealt in electricity, natural gas, paper, and communications and claimed revenues of approximately $100 billion. At the time, the company employed approximately 20,000 people and was considered one of the most innovative companies in the nation. The performance of Enron was revealed to be a fraud, however—sustained by accounting gimmicks and not business fundamentals. The company went bankrupt in 2001, and investors and employees sustained billions of dollars in losses. Enron’s external auditor, Arthur Andersen, a leading accounting firm, also went bankrupt. Other similar scandals involving such companies as WorldCom, Tyco, and Adelphia further fueled public outrage.

Because of Enron and other scandals, Congress took steps that resulted in the Sarbanes- Oxley Act. The act is named after its sponsors, Senator Paul Sarbanes (D-MD) and Representative Michael Oxley (R-OH), and was overwhelmingly approved by both congressional houses. This act contains 11 titles (sections) that deal with various aspects of corporate governance. These include, for example, the responsibilities of the managers, the independence of the auditors, and requirements for financial disclosure. The act also shifted responsibility for setting auditing rules and standards from the private sector (the American Institute of Certified Public Accountants) to the public sector (Public Company Accounting Oversight Board). The major provisions of the act that affect corporate governance are summarized below.

Time	Event
2000	The stock market begins to cool off.
2001	Enron scandal comes to light; billions of dollars of market value vanish.
2002	Many well-known corporations such as AOL, Adelphia, Global Crossing, Kmart, Lucent Technologies, Merck, Tyco International, and Waste Management are found to be culpable of committing fraud.
June 15, 2002	Arthur Andersen, the Enron auditing firm, is indicted and criminally convicted.
July 9, 2002	President George Bush gives a speech about accounting scandals.
July 21, 2002	WorldCom files for bankruptcy—the largest corporate bankruptcy ever; a major financial fraud underlies the demise of the company.
July 30, 2002	The Sarbanes-Oxley Act is passed.

Time Line for Sarbanes-Oxley Act of 2002. TABLE 2.

Responsibilities of the Board of Directors

As mentioned earlier, shareholders appoint the members of the board of directors. The board is supposed to protect the interests of the shareholders. In the real world, the CEO often chooses board members from among friends and acquaintances, to the detriment of shareholders’ interests. In an attempt to remedy this cronyism, Sarbanes-Oxley contains provisions to strengthen the independence of the members of the board of directors from management. The act mandates that the audit committee (a committee of directors that deals with financial matters) of the board of directors should have people who do not serve (and get money from) the company in any other capacity and should not work for a subsidiary of the company. The audit committee also needs to keep track of complaints received regarding financial improprieties and problems with the internal controls. If necessary, the audit committee can hire independent counsel to investigate critical matters.

Responsibilities of the Managers

Sarbanes-Oxley imposed a number of key responsibilities, obligations, and prohibitions on senior management, including certification of the accuracy of financial reports, creation of the internal control reports, and restrictions on personal loans and stock sales. The act also stipulates heavier penalties for criminal behavior.

Public corporations are required to issue an annual report containing financial statements, management discussion of operating results, and the auditor’s report. Sarbanes-Oxley now requires the CEO and the CFO to certify that the financial reports accurately reflect the company’s real performance. In the past, top executives accused of fraud often pleaded ignorance of accounting matters and tried to shift the blame onto accountants. This certification closes such loopholes.

(a) Rules Required

The Commission shall prescribe rules requiring each annual report required by section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) to contain an internal control report, which shall—

(1) State the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and

(2) Contain an assessment, as of the end of the most recent fiscal year of the issuer, or the effectiveness of the internal control structure and procedures of the issuer for financial reporting.

(b) Internal Control Evaluation and Reporting

With respect to the internal control assessment required by subsection (a), each registered public accounting firm that prepares or issues the audit report for the issuer shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this subsection shall be made in accordance with standards for attestation engagements issued or adopted by the Board. Any such attestation shall not be the subject of a separate engagement.

Source: Institute of Internal Auditors, “Sarbanes-Oxley Section 404: A Guide for Managers.” Altamonte Springs, FL: Institute of Internal Auditors, 2008.

The managers are also required to issue an internal control report with each annual report (Section 404). The internal control report states that establishing and maintaining internal controls is the responsibility of the management. It also assesses the existing internal control system strengths and weaknesses. The external auditors then attest to the veracity of that report. The auditors cannot check every transaction in the company since modern corporations have trillions of transactions; rather, they rely on internal controls to evaluate the financial position of the company. If the top management is negligent in establishing and enforcing internal controls, audits are ineffective. The internal controls report, as it is issued by top management, compels management to pay attention to internal controls. Section 404 is the most contentious aspect of the Sarbanes-Oxley Act because of its requirement to implement, document, and test internal controls—a procedure that can be very expensive, especially in larger organizations.

Sarbanes-Oxley also bans corporations from offering personal loans to their executive officers and directors. For example, former WorldCom CEO, Bernard Ebbers, received an approximately $300 million personal loan from the company. Many such instances of personal loans came to light in 2001–2002. Sarbanes-Oxley put an end to that practice.

Many top managers are granted stock options or stock in the company. Since top managers have better information about the company than the average member of the public, they can time the sale of stock to reap maximum profits. Sarbanes-Oxley does not ban this kind of insider trading (except under certain conditions), but it does require that such sales be reported quickly for the benefit of all investors. Compensation for CEOs and CFOs is similarly required to be disclosed publicly. Such disclosure had been required prior to Sarbanes-Oxley, but now the information is easier to find and more transparent. Additionally, top managers are required to return any bonuses awarded for financial performance that later were found to be based on faulty accounting.

Criminal and civil penalties for violation of securities laws and misstatement of financial data are made more severe under the law. In the past, laws dealing with financial fraud were rather lenient and courts tended to award light sentences. Sarbanes-Oxley provides long jail sentences and stifffines for any managers who knowingly and willfully misstate financial data.

Responsibilities of the Auditors

The auditors are expected to be independent from their clients. In the past, auditing contracts were awarded on the basis of friendships and business relationships, which compromised the auditor’s independence. Independence is the cornerstone of any effective audit, and Sarbanes-Oxley contains many provisions to strengthen the auditor’s independence.

Auditors are banned from providing other fee-based services that could lead to a conflict of interest and undermine their independence. Before Sarbanes-Oxley, auditors were allowed to provide certain consulting services such as advice for hiring personnel, internal auditing, and designing financial information systems. Sarbanes-Oxley provides a long list of services that can no longer be performed by auditors. Such a ban is designed to prevent business relationships between the auditor and the client. It is believed that these other, possibly more profitable, contracts compromise auditors’ independence and undermine their willingness to adhere strictly to auditing standards.

The act contains other provisions to preserve independence of the auditor. The audit partner supervising the audit should be rotated every five years, which is meant to encourage professional (as opposed to personal) relationships between the partner and top management. Furthermore, a person employed by an audit firm is barred from assuming a top managerial position with the client company for at least one year after leaving the auditing firm. This provision prevents what used to be called a revolving door between the audit firm and the client. Finally, the newly established Public Company Accounting Oversight Board has the power to investigate auditing firms and penalize them for noncompliance with the law.

Responsibilities of the Securities and Exchange Commission (SEC)

The SEC is a federal agency whose duties include administration of the Sarbanes-Oxley Act. The SEC has been granted additional powers and an expanded budget to supervise compliance with the act. The SEC can:

Set standards of professional conduct for lawyers who practice before the SEC,
Prohibit a person from serving as a director or an officer of a public company, and
Freeze payments to officers or managers of the company if it suspects that securities laws have been violated.

These provisions in Sarbanes-Oxley seem to be straightforward and appropriate for proper corporate conduct. However, the enactment and implementation of the provisions have raised a host of ethical and operational questions.

Consequences of Sarbanes-Oxley

The Sarbanes-Oxley Act raised a firestorm of controversy upon its passage, and certain of its aspects continue to be debated. The objections against the act are philosophical and operational in nature. Romano (2005) raises a compelling philosophical argument against Sarbanes-Oxley. Romano argues that Sarbanes-Oxley demands substantive corporate governance mandates. This means that the act specifies how a business should be conducted and is thus intrusive in nature. The earlier laws required complete disclosure of all information but not directives on how to conduct business. The author argues, after evaluating the academic literature, that such a far-reaching law is not required. Gifford and Howe (2004) argue that such government mandates are detrimental to business because they do not allow more efficient and effective private-sector solutions to bubble up. Similarly, the operational objections against Sarbanes-Oxley refer to excessive compliance costs, the possibility of outsourcing and offshoring accounting jobs, smaller public companies going private to avoid the rigors of Section 404, foreign companies delisting themselves from the U.S. stock exchanges, and the costs of new accounting infrastructure, among other issues.

Much research has taken place regarding the costs and benefits of Sarbanes-Oxley over the last few years. The results, though not conclusive, provide us with some understanding of the consequences of the Sarbanes-Oxley Act. The research is ongoing and has not resolved issues conclusively. The results are summarized below.

Costs

The philosophical issues surrounding the passage show no sign of abating. Romano (2009) argues that Sarbanes-Oxley remains a hurried piece of legislation, a response to a financial crisis. The legislation is flawed and will continue to cause problems for businesses. Butler and Ribstein (2006) suggest that individual investors are better offdiversifying their investments. The Sarbanes-Oxley Act, however, imposes costs on all companies, depressing earnings and stock prices for the entire market. The specific findings of various studies are as follows:

Compliance costs (costs related to Section 404) have increased due to the passage of Sarbanes-Oxley Act. These costs include direct costs such as training of employees, time spent by executives in dealing with compliance, and purchasing of hardware and software as well as indirect costs such as loss in productivity due to resources being diverted to comply with the Sarbanes-Oxley Act. The SEC’s Advisory Committee estimated that the costs for compliance ranged from 0.06 percent of revenues for companies with revenues greater than $5 billion to 2.6 percent for companies having revenues of less than $100 million. There are many other, varying estimates of costs.
Costs increased rapidly immediately after the act was passed. Compliance costs began to rise slowly and then showed some decline as companies became more skilled in complying with the act and also made the needed infrastructure investments.
Audit costs initially increased rapidly, but, as time has gone by, auditors have become more efficient and audit fees have remained flat or decreased slightly.
There is some evidence that some public companies have gone private to avoid complying with Sarbanes-Oxley. Moreover, some private companies have decided not to go public for the same reason.
The market value of smaller public firms has been negatively affected by the act. However, the SEC is providing additional guidance and time to help the smaller firms.
The insurance premiums for directors serving on the board have gone up. The composition of the directors is now more tilted toward lawyers, financial experts, and retired (as opposed to current) executives. Director pay and total costs have significantly increased.

Benefits

The benefits of compliance, as compared to the costs, are somewhat more diffuse, long term, and harder to quantify. Michael Oxley, for example, asks: “How can you measure the value of knowing that company books are sounder than they were before?” He adds that these costs are really investments for the future. Moody’s, a credit rating firm, believes that companies are strengthening their accounting controls and investing in infrastructure required to support quality financial reporting. Bradford, Taylor, and Brazel (2010) argue that compliance with the act has helped corporations to achieve strategic goals and analyze performance more effectively and efficiently. The specific findings of various studies can be summarized as follows:

Some experts believe that the act has helped restore investor confidence in the integrity of financial statements. Some empirical research suggests that Section 404 may reduce the opportunity for intentional or unintentional accounting errors and improve the quality of reported earnings.
Section 404 reports allow the investors to assess risks more accurately and can affect the firm’s cost of equity. Companies that improve their controls lower their borrowing costs.
A survey carried out by the Institute of Management Accountants indicated that both public and nonpublic companies have improved processes, expanded employee job responsibilities, eliminated duplicate activities, and automated manual controls due to compliance with the act. Interestingly, nonpublic companies reaped more benefits due to the compliance.
Compliance with the act may help companies in getting dismissals, a favorable result, in securities fraud class-action cases.
The boards of directors, especially the audit committees, are far more independent and responsive to shareholders than they were in the pre–Sarbanes- Oxley era.
A paper issued by the Institute of Internal Auditors (Rittenberg and Miller 2005) suggests that internal controls in corporations have improved and their financial statements are viewed as more reliable.

The Economic Crisis of 2008–2009

Sarbanes-Oxley is the latest salvo in an ongoing war against poor corporate governance, mismanagement, and fraud. The act required that many aspects of corporate governance, which were earlier left to management’s discretion, conform to the new legal mandates. Many powerful forces—for example, global corporations, top managers, big accounting firms, politicians, and lobbyists—bring forward complaints whenever new accounting rules and regulations are set. These groups have competing agendas and motives, which, moreover, do not necessarily coincide with the public interest. Occasionally, however, momentous events, such as a series of corporate frauds and bankruptcies, converge to create the need for sweeping legislation.

The economic crisis of 2008–2009 has, in many respects, overshadowed the Sarbanes- Oxley debate. This latest crisis is similar to but worse than the one seen in 2001–2002. The losses due to speculation in mortgage-backed securities can be measured in the trillions of dollars, and the human costs in terms of jobs, savings, pensions, state and local governments, and so on are greater still. The crisis presents a host of new legal, ethical, and regulatory issues. Yet many of the provisions of Sarbanes-Oxley, such as requiring due diligence, preventing conflict of interest, and adhering to basic fiduciary responsibilities, remain relevant to the current situation. Thus, the chances that Sarbanes-Oxley will be rolled back seem remote. As noted, the Obama administration has given strong signals that additional legislation is on the way.

It is clear that the new regulations are aimed primarily at the financial and banking industry. The draft of the act proposes reforms to meet five key objectives (Department of the Treasury n.d.):

Promote robust supervision and regulation of financial firms,
Establish comprehensive supervision and regulation of the financial markets,
Protect consumers and investors from financial abuse,
Improve tools for managing financial crisis, and
Raise international regulatory standards and improve international cooperation.

To achieve these objectives, various measures have been proposed—for example, creation of a Financial Services Oversight Council, granting additional powers to the Federal Reserve, establishing a national bank supervisor, enhancing regulation of the securities market and derivatives (which lay at the heart of the problem), and implementing higher standards for the providers of consumer financial products. There is discussion, too, of not relying on corporate disclosure but rather providing mandates on running and managing a business. The ensuing legislation will likely share many features with Sarbanes-Oxley and will likely cause considerable controversy and debate.

Conclusion

The cycle of corporate wrongdoing and government regulation goes on. As people increasingly look to the stock market for investments and put their hard-earned savings in the market, it becomes ever more imperative that these markets remain transparent, properly regulated, and compliant with the rules of the game. Regulations such as Sarbanes- Oxley or the most recent financial regulatory reform bill have, of course, both advantages and disadvantages. There are ideological and philosophical issues that need to be drawn out, defined, and discussed. Even when enacted, it is difficult to properly evaluate these regulations or perform straightforward cost/benefit analyses. Thus it seems that the perpetual chase between the law and the outlaws will continue for some time.

Ashutosh Deshmukh

See also Bank Bailouts; Corporate Tax Shelters; Financial Regulation; Corporate Crime (vol. 2)

Further Reading

Akhigbe, A., A. Martin, and M. Newman, “Risk Shifts Following Sarbanes-Oxley: Influences of Disclosure and Governance.” Financial Review 43 (2008): 383–401.
Alkhafaji, A., “Corporate Governance: The Evolution of the Sarbanes-Oxley Act and Its Impact on Corporate America.” Competitive Review: An International Business Journal 17, no. 3 (2007): 193–202.
Anandarajan, A., G. Kleinman, and D. Palmon, “Auditor Independence Revisited: The Effects of SOX on Auditor Independence.” International Journal of Disclosure and Governance 5, no. 2 (2008): 112–126.
Ashbaugh-Skaife, H., D. Collins, W. Kinney, and R. LaFond, “The Effect of SOX Internal Control Deficiencies on Firm Risk and Cost of Equity.” Journal of Accounting Research 47, no. 1 (2009): 1–43.
Baynes, L., “Just Pucker and Blow? An Analysis of Corporate Whistleblowers, the Duty of Care, the Duty of Loyalty, and the Sarbanes-Oxley Act.” St. John’s Law Review 76, no. 4 (2002): 875–896.
Bhagat, S., B. Bolton, and R. Romano, “The Promise and Peril of Corporate Governance Indices.” Columbia Law Review 108, no. 8 (2008): 1803–1882.
Bradford, M., E. Taylor, and J. Brazel, “Beyond Compliance: The Value of SOX.” Strategic Finance (May 2010): 48–53.
Butler, H., and L. Ribstein, The Sarbanes-Oxley Debacle: What We’ve Learned: How to Fix It. Washington, DC: AEI Press, 2006.
Chang, H., G. Fernando, and W. Liao, “Sarbanes-Oxley Act, Perceived Earnings Quality and Cost of Capital.” Review of Accounting and Finance 8, no. 3 (2009): 216–231.
Department of the Treasury, Financial Regulatory Reform: A New Foundation: Rebuilding Financial Supervision and Regulation. Washington, DC: Department of the Treasury, n.d.
Gifford, R., and H. Howe, “Regulation and Unintended Consequence: Thought on Sarbanes- Oxley.” CPA Journal 74, no. 6 (2004): 6–10.
Jung, K., “How Will the Current Economic Crisis Change Corporate Management?” SERI Quarterly (October2009): 63–72.
Marshall, J., and E. Heffes, “Is Sarbanes-Oxley Working? Study Suggests It Is.” Financial Executive 24, no. 1 (2008): 10.
Mason, M., and J. O’Mahony, “Post-Traditional Corporate Governance.” Journal of Corporate Citizenship (Autumn 2008): 31–44.
Mishra, S., “Counting Progress: The State of Boards Five Years after Sarbanes-Oxley.” Corporate Governance Advisor 16, no. 1 (2008): 12–20.
Petra, S., and G. Lukatos, “The Sarbanes-Oxley Act of 2000: A Five-Year Retrospective.” Corporate Governance 9, no. 2 (2009): 120–132.
Rezaee, Z., Corporate Governance Post-Sarbanes-Oxley: Regulations, Requirements, and Integrated Processes. New York: John Wiley, 2007.
Rittenberg, L., and P. Miller, Sarbanes-Oxley Section : Looking at the Benefits. Altamonte, FL: IIA Research Foundation, 2005.
Romano, R., “The Sarbanes-Oxley Act and the Making of Quack Corporate Governance.” Yale Law Journal 114, no. 7 (2005): 1521–1611.
Romano, R., “Does the Sarbanes-Oxley Act Have a Future?” Yale Journal of Regulation 26, no. 2 (2009): 229–342.
Sherman, S., and V. Chambers, “SOX as Safeguard and Signal: The Impact of Sarbanes-Oxley Act of 2002 on US Corporations’ Choice to List Abroad.” Multinational Business Review 17, no. 3 (2009): 163–178.
Stovall, D., “SOX Compliance: Cost and Value.” Business Review 11, no 2 (2008): 107–113.