Reform gone wrong
When a series of accounting scandals, such as those at Enron and WorldCom, shook corporate America in the early 2000s, the U.S. government responded with a new federal law to reform business practices.
Among other things, the 2002 Sarbanes-Oxley Act (SOX) required the boards of publicly-traded companies to have a majority of outside, independent directors and for the firms to implement audit, nominating, and compensation committees comprised solely of independent directors. The big question is: Did SOX work?
New research from Karin Schnarr, EMBA ’08, PhD ’15, an assistant professor at Wilfrid Laurier University, and Associate Professor Glenn Rowe shows the SOX provisions did not have the intended effect.
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