Ten years ago, even five years ago, the American market economy was the model for and the envy of the world. The marvelous flexibility of our economy, our belief that “change” is a good word, our constant striving for innovation were and are factors that make ours an economic system that can compete with—and beat—any other.
And yet, in the Sarbanes-Oxley Act of 2002, the Congress and the president created a law that was revolutionary in the changes it prescribed and the activities it proscribed in our capital markets. It ruled that officers, directors and auditors of publicly traded companies must take new responsibility for the accuracy of the companies’ financial reports and face stiff penalties for failing to do so.
How could that have happened? I believe it happened because in the course of the 1990s, many American business leaders got confused and their moral compasses stopped working.
William J. McDonough is chair of the Public Company Accounting Board, which was created by the Sarbanes-Oxley Act of 2002. The board oversees the auditors of public companies to protect investors and the public interest.