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Paul Sarbanes’ Legacy: Landmark Reforms in Company Accountability

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By: Jeffrey Rubin
4 days ago

The Business Law Section mourns with profound sadness the passing of former Senator Paul Sarbanes. As chairman of the Senate’s Committee on Banking, Housing and Urban Affairs, and the author, together with Representative Michael Oxley, of the landmark Sarbanes-Oxley Act of 2002, Senator Sarbanes was truly the investors’ friend. The Sarbanes-Oxley Act significantly reformed corporate accountability by enhancing the independence and responsibilities of public company audit committees, and  by creating the Public Company Accounting Oversight Board (PCAOB), which was charged with the robust oversight of accounting firms that audit public company and broker-dealer financial statements.  The changes effected by the Sarbanes-Oxley Act were seismic, and many, such as the whistleblower provisions and the requirement for assessments and audits of internal control over financial reporting, were initially viewed as significant challenges by the business community. However, from the vantage of 18 years since the enactment of the Sarbanes-Oxley Act, it is clear that Senator Sarbanes’ prescience and wisdom have not only significantly improved the quality of disclosures to investors, but have impelled public companies to implement internal corporate controls and financial risk assessment procedures that increase the ability of companies to identify and remediate weaknesses before they take on entity-level significance.

We mourn the passing of Senator Sarbanes not only because of his seminal contributions to investor protection, but for far more. His voice was one of civility and reason, and he was never hesitant to work across the aisle to achieve a common goal. His manner was understated, but his impact was considerable.  In our contemporary political landscape, voices like that of Senator Sarbanes are very much missed. To his family and friends, we extend our deepest sympathy.

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