Sarbanes-Oxley Act 15th Anniversary
The 15th anniversary of the Sarbanes-Oxley Act (enacted July 30, 2002) can serve as an important teaching moment for the board and senior management concerning the continuing legacy of that seminal law. This, with respect to both principles of corporate responsibility, and also the relationship of corporate counsel to governance and to the foundational principles of corporate compliance.
As many lawyers and compliance professionals may recall, the law was enacted in response to the series of notorious and crippling accounting controversies that had occurred in prior months involving such companies as Enron and WorldCom. The goals of the Act included efforts to enhance the reliability and transparency of public company financial statements. Yet, many current members of health system board and senior management were not serving in similar positions in 2002 and may have limited recollection of these notorious circumstances.
The essential Sarbanes legacy is grounded in (i) its focus on transparency and accuracy of financial statements; (ii) the need for full and “real time” disclosure of material corporate developments; (iii) expansive new laws relating directly to corporate compliance; (iv) the adoption of new professional responsibility and other enhanced ethical obligations of corporate gatekeepers, including lawyers, accountants and corporate financial officers; and (v) countless corporate responsibility-centered doctrines and source materials; (e.g., the evolution of, and continued emphasis on, governance best practices).
The Act and its progeny have had an enormous impact on the role and responsibilities of the governing board, including the institution of new levels of accountability on directors and executives. It has also directly affected the duties of the general counsel, and her relationship to the client’s governance, executive leadership, financial and compliance functions. Greater awareness of these forces may help leadership respond to the “why” question, as it relates to the origins and continuing legacy of corporate responsibility.