Sarbanes-Oxley Case
Sarbanes-Oxley which was enacted in 2002 was in response to stop the numerous corporate scandals occurring. Many have protested SOX for its high start ups costs and expensive reporting requirements. However, the long-run benefits of the act out way the initial start up costs. The act created a system that standardized processes and a centralized system that mixed compliances with regulations and integrated the process into the organization’s culture (Cone, 2006). It also created a system that integrated far-flung offices and acquisitions. Under the SOX Act ABC would have been required to provide information to stockholders and be more liable to their board of directors. Under the act the actions taken by ABC would not have happened and would have not created the costly consequences that happened in the takeover. Investors would have also been aware of the change in the organization’s financial status. Under SOX corporations are required to alert investors within four business days of the change. With this requirement stockholders would have been aware of the possible takeover and able ensure the takeover was best for them. SOX has also shown some other benefits in addition to a standardized reporting system. It has enabled companies to manage risks better and uncover weaknesses in financial controls (Cone, 2006).
The one area where I would change the Sarbanes-Oxley is the requirement concerning how quickly a organization must file with the SEC. SOX requires companies to file quarterly and annual reports much sooner than normal. Firms are required to file annual reports in two months instead of three, and quarterly results within 35 days instead of 45 (Special report: Sarbanes-Oxley a price worth paying?, 2005). This puts a greater burden on heads of board members who serve on multiple boards.