The article considers the impact of the Sarbanes-Oxley Act to business, especially from an ethical dimension. The author of the article notes that the Act has changed businesses making businesses dialogue about ethics. The article argues that without such ethical considerations, businesses cannot regain consumer and employee confidence. It proposes three practices from which a business can benefit from in compliance to the Act and also to recuperate customer and employee confidence in business. The three practices are fostering a culture of ethics, making decisions based on ethics, and encouraging employee feedback.
In order to foster a culture of ethics, the article proposes that businesses should capitalize on the ethical knowledge and experience gained by accounting and finance departments in complying with the Act. The knowledge is shared and applied in the entire organization. The most knowledgeable people are used as role models and rewarded for their ethical excellence. This would influence other employees to act ethically.
In relation to ethical decision making, the article proposes that the top management should make decisions taking into account ethical considerations. This would trickle down to the employees, ensuring that decisions made in the organization are based on ethics. The article also proposes that top managers should share their experiences with their employees to serve as precedent to the employees whenever they encounter a similar situation.
On employee pushback, the article suggests that employees be given the opportunity to give feedback or question the decisions of the top management, especially where such decisions have ethical implications to the business. This is done either through anonymous feedbacks or through ethics hotlines. The article proposes that if these practices are put into action consumer and employee confidence will be restored.
The article raises the legal issue of how business organizations are to comply with the ethical requirements of the Sarbanes-Oxley Act.
For protection of consumers and also the business itself, business and ethics cannot be separated. This is because virtually all business decisions have ethical considerations, which if not correctly addressed may result to adverse effects. Additionally, businesses act through people, and one way to ensure that such people and by extension the business too, act well is to ensure they subscribe and ascribe to strict ethical standards. The lack of or disregard for ethics is one of the major causes of collapse of Tyco, Enron, and WorldCom. Had the businesses been subject to strict ethics, perhaps the fraud perpetuated would not have occurred or at the very least it would not have been as extensive as it was.
Essentially then businesses must have regard for ethics in their actions, hence the necessity and importance of the Sarbanes-Oxley Act. One of the key changes it introduces is the requirement for senior executives to take personal responsibility for the correctness of financial reports. This means that the top management must ensure that financial reports are a true reflection of the business. This calls for truthfulness and integrity all, which revolve around ethics. Failure to comply attracts criminal penalties; either fines up to five million, or imprisonment for a maximum of 20 years, or both. It is important to note that owing to the person responsibility requirement; the guilty person is penalized personally.
Another change it makes is the requirement for enhanced disclosure of financial information. Disclosure in this sense relates to the business as well as to certain employees such as securities analysts. To businesses, they are to make timely and in-depth reports on the financial condition of the business. To securities analysts and directors, they are to disclose any conflict of interest that may arise in the discharge of their duties.
These requirements force businesses to make decisions with specific reference to ethics. For instance, in hiring employees, such as auditors and analysts they have to ensure that such people have integrity and in no way have questionable ethics. Similarly, before making any reports, they must ascertain that the reports are truthful and correct.