South-Western - Management  
Business Management Column
Topic Ethics and Social Responsibility
Key Words Ethics, Sarbanes-Oxley Act
InfoTrac Reference CJ114903872
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News Story 

A PricewaterhouseCooper's survey of 174 chief financial officers and managing directors had the following results:

  • 88% of senior executives expect that board directors in their companies will have more influence.
  • 73% say their board members will take a greater role in managing risk.
  • 72% say their company has established a whistle-blower process.
  • Over 60% report the audit committee is more qualified and more directly involved in financial filings.
In addition, boards are tending to meet more often, and the meetings are longer. Compliance with the act is costing companies more money, too, particularly for audits. The increased costs are still less than the cost of a decline in investor confidence.

Leaders at big companies point out that ethics need to permeate deeper than the requirements of Sarbanes-Oxley. It needs to be drilled into employees on their first day of work, and focus on prevention, not reaction. Companies must be ethical even if it means lost business with a customer who disagrees with their policies.

It is up to the leader of a company to shape the culture by setting high values and making tough choices.

Questions
1.

What is the Sarbanes-Oxley Act? How did it come about?

2.

How does this legislation promote business ethics? Explain your answer.

Source "Business Management Column," The Centre Daily Times, State College, Pa., Knight-Ridder/Tribune Business News, April 4, 2004.
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