Accidentally in the public interest: The perfect storm that yielded the Sarbanes-Oxley act

In the face of varied protests over the mandates of the U.S. Sarbanes-Oxley Act, pressure has mounted to ease the impact of Sarbanes on non-U.S. companies and smaller companies. The rhetoric around these protests tend to be based on essentially three issues: (1) the imperialistic nature of the U.S. legislation, (2) the abnormal fashion in which the Act worked its way through the U.S. legislative process, and (3) the balance between costs and benefits of the requirements mandated in Sarbanes. This study focuses on working through the rhetoric in order to understand the intent of Sarbanes, the perfect storm that developed and carried the bill through the legislative process, and the debate over costs versus benefits. The position that is arrived at in the paper is that a simultaneous combination of intense scrutiny by the press, the unveiling of another major financial scandal (i.e. WorldCom), and a Senate committee that placed heavy reliance on former SEC Chairman Levitt's corporate governance proposals created a storm that the business and accounting lobbies could not counter, and the result was a significant piece of legislation that almost by accident created one of the greatest protections in history for the public interest within the arena of the financial markets and related corporate behavior. The benefits appear to be worth the costs.