Question

Discuss the major components of the Sarbanes-Oxley Act of 2002 and Corporate Governance?

Counterpoint: According to Romano (2004), the Sarbanes-Oxley Act (SOX), in which Congress introduced a series of corporate governance initiatives into the federal securities laws are not just a considerable change in law but also a departure in the mode of regulation. The federal regime had until then consisted of disclosure requirements, rather than substantive corporate governance mandates, which were traditionally left to state corporate law and were not part of the federal securities regime. Federal courts had, enforced such a view of the regime’s strictures, by characterizing efforts of the SEC to extend its domain into substantive corporate governance as beyond its jurisdiction.

Answer 1

1. The Sarbanes-Oxley Act, introduced in 2002 to restore investors' confidence in accounting practices after a number of corporate scandals, consists of a total of 11 titles of which 4 are major.

First title is the creation of Public company accounting oversight board (PCAOB) which governs public accounting firms.

Second title describes Auditor Independence.

Third Title discusses about Corporate Responsibility such as mandating Audit Committee for issuers.

The Fourth Title elaborates on Enhanced Financial Disclosures.

The other titles mentioned in the Act are Declaration to address conflicts of interest, penalties for white collar crime, corporate tax reforms, corporate and criminal fraud accountability and SEC Powers and authority.

2. Corporate Governance is a system in which the Board of Directors in the interests of the stakeholders, directs and governs for more transparency and better management.