Sarbanes-Oxley Act of 2002 - Understanding the Requirements and the Canadian Response

The Sarbanes-Oxley Act (SOX) reforms and their Canadian counterparts, which are intended to reduce unethical behaviour by forcing management to take more accountability for the information released to shareholders, are without question extremely time consuming and costly, and in spite of the massive spending, it is also likely that in the future there will be another Enron. Unethical people will always try to exploit the system. By taking the steps to comply with these reforms and promote ethics in an organization, it may help prevent these good people from going bad. It is ultimately the investors and the public that will benefit for the SOX reforms as there is strong speculation that SOX will encourage employees to speak up about problems in their companies. There are also strong benefits for corporations and executives/directors that take these reforms seriously and make the effort to implement effective ethics programs. The average investor may be slow to catch onto the specifics in the new legislative reforms, but with SOX 404 disclosures climbing, and credit ratings reinforcing these new reforms, it won't take long. The United States is serious about reform and corporate America needs to take heed and strengthen their ethical practices; otherwise, companies risk being caught by a heavily armed regulator that is just waiting to show that they mean business.