Implementation of the Oxley-Sarbanes Act – Essay Example
The paper "Implementation of the Oxley-Sarbanes Act " is an excellent example of an essay on history. The events leading up to the Sarbanes-Oxley Act and those intimately involved with these events have gained no small degree of infamy by this time. The early 1990s witnessed great changes in the American economy, especially the financial markets. Stock prices were increasing at a very rapid rate and an entirely new economy seemed to be emerging. The old manufacturing stalwarts gave way to firms that offered financial services and information technology expertise. Millions of investors took their retirement savings and invested in the stock market. The “dot-com” boom was underway with some economists predicting that the traditional business cycle was dead. Then the bubble popped, exposing the market’s susceptibility to over-exuberance and a plethora of dishonest business practices that were masked by the prosperity being enjoyed in all sectors of the economy. Company names like Enron, WorldCom, Adelphia, and Tyco became synonymous with greed, corruption, and dishonesty. The conflicts of interests in these firms between analysts, lawyers, accountants, and executives were too numerous to count. Added to these gross improprieties was a change in corporate culture that emphasized short-term gains, obsessing over earning from quarter to quarter, instead of devoting talent and efforts towards long-term sustainable growth (Donaldson, 2003). The Sarbanes-Oxley Act has greatly affected how CFO’s and CEO’s handle financial statements. CEOs and CFOs must certify in each periodic report containing financial statements that the report fully complies with relevant sections of the Securities Exchange Act of 1934 and that the information truly shows the company’s financial condition. They also must produce financial statement updates at the bidding of the Securities and Exchange Commission if they deem this action to be necessary for the public good. Attached to these new rules for CEO’s and CFO’s are also stiff, mandatory sentencing and monetary damage guidelines for executives that willfully neglect to adhere to the new rules in the Sarbanes-Oxley Act.