Sarbanes-Oxley: A Review of the Empirical Evidence and a Proposal for Reform

At the signing ceremony for the Sarbanes-Oxley Act of 2002, President Bush referred to the legislation as "The most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt." In addition to increasing disclosure requirements for publicly traded companies, Sarbanes-Oxley (i) increased the role of independent directors in corporate governance, (ii) expanded the liability of officers and directors, (iii) required companies to assess and disclose the adequacy of their internal controls, (iv) created the Public Company Accounting Oversight Board ("PCAOB") to regulate auditors and increased regulation of audit practices, and (v) prompted the Securities and Exchange Commission ("SEC") and major U.S. securities exchanges to adopt new rules and listing standards related to corporate governance.