Corporate Compliance Benchmarking
...public outrage of corporate financial instabilities and scandals. The act itself was designed to plan out corporate governance rules and regulations to avoid situations such as those affecting Enron, Tyco, and WorldCom.
The act is enforceable only to publicly traded companies, in order to protect the interest of investors and stakeholders. Corporate governance prior to the implementation of SOX was not as strictly control, providing grounds for manipulation of data and resources as seen fit by company officials. With the SOX Act, publicly traded companies were forced into tighter security and detailed reporting of their operations and financial statements.
In this study we see how companies such as PepsiCo, Lowe’s, Martha Stewart, Hewlett Packard, have made changes to their corporate governance in order to comply with SOX standards. When companies make the extra effort to enforce these regulations throughout the organization it presents them as being responsible in the eyes of their stakeholders. These tight measures are what helps is make a company successful in the public market.
Enron is known as the American based electricity company that filed bankruptcy, and was one of the largest companies to ever file bankruptcy in history. The company’s bankruptcy resulted in the disclosure of false profit report and using accounting methods that failed to follow the proper procedures. The internal and external control failed to detect the financial losses disguised as profits for many of years. The managers activities brought the company to the brink of ruin, as they escaped with millions of dollars as they retired or sold their company stock before the price plummeted. Employees lost their jobs to find their retirement funds that were invested in the Enron stock. It had been depleted because of this scandal the SEC administered an act called Sarbanes Oxley...
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