Sociology

The subject matter of this policy analysis is The Sarbanes-Oxley Act of 2002. This act has been referred to by a number of names, the easiest among them being SOX and Sarbox. The actual date of its enactment into law was July 30, 2002. It was drafted by Paul Sarbanes who was a U.S. Senator and Michael Oxley who was a U.S. Representative at the time of drafting the act. The drafting of this bill was aroused by a series of accounting scandals and corporate fiasco that had rocked the U.S. at that time. Big companies were faced with these scandals key among them being Enron which was one of the largest corporations in America. Others included WorldCom, Adelphia and Tyco International. Peregrine Systems was also reported to be facing the same predicament. The share prices of such companies collapsed and investors panicked as they were at the verge of loosing a lot of money (Jasso, p. 39).

These scandals led to market failure in the sense that these companies could not come up with valid financial statements. This led to their collapse. Investors and indeed the government lost confidence as far as corporate accountability was concerned. A solution had to be found that would ensure that the public confidence was restored and the executives of public corporations accepted liability in cases of financial fraud. This solution came in the form of Sarbanes-Oxley Act. It was signed into law by George Bush who was the president at the time (Jasso, p. 2).

Ethical Issues
This act aims at ensuring that ethical conduct is upheld within any organization. In any business settings, certain ethical aspects have to be monitored to ensure that the objectives of the organization are achieved and the stakeholders are not exposed to any unnecessary danger. This act ensures that certain ethical aspects apply to the executives in the order of directors and senior officers. These executives have to take charge to prevent any unethical practices which crop up in their organizations. This Act goes a long way to the restoration of ethical reporting in corporations and other business entities (Butler and Ribstein, para. 3).

Efficacy
Sarbox remains a very controversial Act to date. There is no consensus yet regarding its efficacy as a powerful tool for initiating reform in Corporate America. Suggestions have been made calling for its modification while others feel that repealing it will be the ideal solution. Many feel that the Act is believed to have served the purpose it was intended for better than was thought. However, it is still a source of concern to start-up companies it is also thought that it hinders the global competitiveness of America and appears to go against society capitalism of America. While more time will be required to determine with certainty the effectiveness of this Act, it has already been noted to this end that large companies in the public domain have been doing all they can to comply with this law. Though it is initially going to prove to be expensive and tedious, it is bound to be a general way of life within such corporations (Butler and Ribstein, para. 3).

Public companies which are relatively small would find it particularly difficult to manage the fixed costs associated with compliance. Such companies may have been delisted from stock exchange in the U.S. In todays capitalistic society where competition and innovation remains the order of the day, this law may be seen as a crippling factor. Section 404 in Sarbox is particularly a challenge for start-up companies which have for a very long time relied on IPO for their financing. This has forced many companies to explore other means of expanding their capital. Foreign companies which had initially expressed the desire to invest in the US exchanges have explored other alternatives like Stock Exchange in London among others. It is still alleged that Sarbox has made many companies adopt the vice of issuing financial statements which are faulty. It is approximated that cases of fraud that have been discovered after the enactment of this law were reported by individuals and not the regulatory authority that was charged with observing compliance to this law. This indicates that the regulatory apparatus has been ineffective in discovering corporate fraud. This shows that Sarbox has not been very effective in the prevention of corporate fraud (Butler and Ribstein, para.6).

Implementation
Sarbox came up with the Public Company Accounting Oversight Board (PCAOB), which was charged with overseeing public company audit, outlining the rules for audit reporting, and the inspection, investigation and the enforcement of compliance mandates. Auditors are rendered independent by restraining them from engaging in consulting services. Section 302 of this Act emphasizes on the liability of executives in public companies on an individual level. They are thus obliged to verifying the authenticity of financial statements before appending their signatures. In the course of pension fund blackouts, directors are not allowed to trade company stock. Companies are prohibited from giving personal loans to its executive officers and directors. A code of ethics has to be formulated in any organization especially among financial officers. In case of changes in security ownership, the management alongside the primary stockholders should disclose the same (Butler and Ribstein, para.5).

Analysts are separated from the possible conflict of interest by restrictions placed on the ability of the investment bankers to pre-approve finings of research. The federal court is charged with the authority of banning anybody guilty of misconduct from the purchase of penny stock. Sarbox gives room for research and studies on accounting firms, investment banks as well as corporate malfeasance. Securities fraud can attract a hefty fine as well as imprisonment for a period of not more than 25 years. Altering corporate records is also a punishable criminal offense as detailed in section 802. Corporate officers are charged with a compulsory duty of certifying financial records. The CEO must sign corporate tax returns (Butler and Ribstein, para.7).

Evaluation
Models that are skewed towards corporate responsibility must be used to evaluate the impact of public policy. One of such models is the Pyramid of Corporate Social Responsibility (Carrolls Pyramid). This model consists of four parts, which are stacked in an order such that they are ascending from basic to advanced levels. These are Economic responsibilities, legal responsibilities, ethical responsibilities, and philanthropic responsibilities (Carroll, 1991, p.42). This Act has been credited with effectively addressing the initial three aspects. This law has improved economic responsibility which has in the long run led to economic sustainability. Public companies have become more economically viable than they initially were. This has restored investor confidence who have responded by investing more and extending their periods of investment (Carroll, p.45).

Legal responsibility has been improved by this law by reinforcing the laws that are already in existence and coming up with new ones all in a bid to prevent corporate fraud. Law goes a long way to ensuring morality and ethics in any given society. Sarbox has gone a long way into setting a good platform for ethical practices. This is the case even in the context of companies that are only worried with compliance to the law. While there are many models that can be used to evaluate the law, Carrolls Pyramid is one of the best (Carroll, p.45).

Recommendation
One of my suggestions would be the creation of a program that would ensure tax relief in the course of compliance with Sarbox. This is more so the case when we consider start up companies and those that get limited revenue. This would in compliance especially to section 404 and the Act in general. It is advisable that US government should engage in tax reduction for companies which spend in excess of one percent of their revenue for compliance to this law. This should be extended based on income reports which are most recent so that the relief does not continue when the company has been able to adequately cater for this cost and to assist those companies which may have slipped down in terms of revenue. This would in the long run save a number of companies from being delisted from stock exchange market.