Business Ethics Now 3rd Edition by Andrew Ghillyer

Exercise 13

FOXES GUARDING THE HENHOUSE
The Sarbanes-Oxley Act, which the United States enacted in an atmosphere of extraordinary agitation in 2002, is one of the most influential-and controversial-pieces of corporate legislation ever to have hit a statute book. Its original aim, on the face of it, was modest: to improve the accountability of managers to shareholders, and [then] calm the raging crisis of confidence in American capitalism aroused by scandals at Enron, WorldCom, and other companies. The law's methods, however, were anything but modest, and its implications … are going to be far-reaching.
The cost of all this [new oversight] is steep. A survey by Financial Executives International, an association of top financial executives, found that companies paid an average of $2.4 million more for their audits [in 2004] than they had anticipated (and far more than the statute's designers had envisaged). … This result underlines a notable and unintended consequence of the legislation: it has provided a bonanza for accountants and auditors-a profession thought to be much at fault in the scandals that inspired the law, and which the statute sought to rein in and supervise.
Already reduced in number by consolidation and the demise of Arthur Andersen, the big accounting firms are now known more often as the Final Four than the Big Four, since any further reduction is thought unlikely.
WHO'S LOOKING OUT FOR THE LITTLE GUY
Smaller companies without access to the internal resources (or funds to pay for external resources) to comply with Sarbanes-Oxley are being particularly hard-hit by the legislation, even though the transgressions that prompted the statute in the first place came from large, publicly traded organizations. This is not to suggest that smaller firms don't face their own ethical problems-it just seems that they are expected to carry an administrative burden that is equal to that of their much larger counterparts.
NOT VERY NEIGHBORLY
Sarbanes-Oxley applies to all companies that issue securities under U.S. federal securities statutes, whether headquartered within the United States or not. Thus, in addition to U.S.-based firms, approximately 1,300 foreign firms from 59 countries fall under the law's jurisdiction.

Reactions to SOX from this quarter were swift. Some foreign companies that had previously contemplated offering securities in the U.S. market reconsidered in light of the conflicts they believe SOX created. For example, in October 2002, Porsche AG announced it would not list its shares on the New York Stock Exchange. A company press release identified the passage of SOX as the "critical factor" for this decision and singled out CEO and CFO certification of financial statements for criticism. After recounting the process Porsche uses to prepare, review, and approve its financial reports, the release concluded that "any special treatment of the Chairman of the Board of Management [i.e., Porsche's CEO] and the Director of Finance would be illogical because of the intricate network within which the decision-making process exists; it would be irreconcilable with German law."
SOX has introduced sweeping changes in the name of enforcing corporate ethics. Is it really a "fair" piece of legislation Explain your answer.