South-Western - Management  
Reporting for SOX Duty
Topic Ethics and Social Responsibility
Key Words SOX, conflict of interest, whistleblower
InfoTrac Reference A147534642
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News Story

The Sarbanes-Oxley Act of 2002, or “SOX”, instituted financial and operational controls and disclosure requirements. At the same time, it documented codes of ethics for companies to follow. To be in compliance, publicly traded companies must publish a code of conduct and ethics that must be proactively communicated to all employees. SOX makes CEOs and CFOs criminally liable for poor ethical decisions at their companies.

SOX contains management certification requirements to confirm that no potential conflict of interest exists that could threaten the validity of a corporate filing. Conflicts of interest exist when outside business interests or personal interests adversely affect or have the appearance of adversely affecting judgment at work. Anything that could constitute a potential conflict of interest needs to be disclosed in writing, such as an undisclosed family relationship with co-workers, customers, suppliers, or competitors. Other examples of potential conflicts of interest could include accepting a personal benefit that obligates you to a vendor or customer, accepting or offering cash under any circumstances, doing personal business with a customer that takes away business from your company, or having a financial interest in a customer, supplier or competitor.

Another company obligation relates to company property, of which e-mail and voice mail are also a part. Employees need to realize that all Internet visits are traceable, and any viewing of pornography on company time is impermissible, even if no one else sees it. Also, whatever is written on the company’s e-mail becomes an electronic record and can potentially be used against you at a later date. Use the phone for sensitive communication, or speak with corporate counsel about making communications an attorney-client privileged document, if you feel e-mail is the best way to communicate a sensitive message.

Section 806 of the act, whistleblower protection, prohibits retaliation against employees of any company who make good-faith complaints. If employees fear going to their immediate supervisors with complaints, they should be made aware of a flexible reporting chain. A company can only fix problems that it is aware of.

Finally, SOX also refers to harassment and discrimination in the workplace. If you are a supervisor and develop a personal relationship with a subordinate, it is important that you disclose the relationship.


Define a conflict of interest. What should you do if you believe a conflict of interest might exist?


What is a whistle-blower? How are whistle-blowers protected?


What can companies do to make sure that their employees are aware of the company’s code of ethics?

Source “Reporting for SOX Duty,” HR Magazine, June, 2006, pp. 161-168.
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