The Sarbanes-Oxley Act
In July of 2002, Congress passed a new law which very well may revolutionize the way businesses control their finances and accounts. This law is known as the Sarbanes-Oxley Act (SOX) or the Public Company Accounting Reform and Investor Protection Act of 2002. Named for Senator Paul Sarbanes and Representative Michael G. Oxley, the act was a result of numerous corporate and accounting scandals affecting the trust of millions of investors worldwide in any future investments. The act contains 11 sections which cite different corporate board responsibilities, criminal penalties and how each company must comply with the regulations. Though it is still too early to tell, many consider the Sarbanes-Oxley Act to be one of the most significant changes to U.S. securities laws since President Roosevelt's New Deal program.
The companies that played a part in the drawing up of the Sarbanes-Oxley Act with their corporate scandals were some of the most successful and well known businesses in the United States. These companies include but are not limited to Tyco International, Peregrine Systems, WorldCom and most famously Enron.
The largest culprit of the above mentioned companies, leading to the formation of the Sarbanes-Oxley Act was Enron, which made headlines from 2001-2002. Enron, one of the countries leading companies in energy production employed about 21,000 people and generated around $111 billion in revenue annually before declaring for bankruptcy in early December of 2001. It had even been named America's Most Innovative Company by Fortune Magazine for six consecutive years, unknowing of the train wreck that was about to unfold.
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