Corporate Responsibility

President Bush Signs Corporate Corruption Bill.  Click HERE to read the President's statement.

Analyses of the Corporate Responsibility Legislation: Sarbanes-Oxley Act 2002

Instilling Corporate Responsibility: How Do We Decide When and Where the Criminal Law is the Answer?

Did Securities Litigation Reform Contribute to the Current Crisis?

Lawyers and Accountants: What Did They Know and When Did They Know It?

Corporate Governance Reforms

An Analysis of CEO and CFO Certification Requirements


Is the Public Company Accounting Oversight Board Constitutional?

Erika C. Birg March 24, 2007

In the highly publicized and recently enacted Public Company Accounting Reform and Investor Protection Act of 2002, S. 2673, 107th Cong., also known as the Sarbanes-Oxley Act of 2002 (the "Act"), Congress provides for the creation of a Public Company Accounting Oversight Board (the "Board"), to oversee public company audit functions and, it is hoped, to prevent further accounting scandals such as the "Enron" problem. The members of the five-person Board are to be appointed by the Securities and Exchange Commission ("SEC"), with the idea that this Board will be "independent," and "will set clear standards to uphold the integrity of public audits, and have the authority to investigate abuses and discipline offenders." George W. Bush, July 30, 2002 speech, (last visited Sept. 9, 2002). As shown more fully below, however, Congress’s desire to create an "independent" Board under the auspices of the SEC actually may run afoul of the Appointments Clause, U.S. Const. Art. II, § 2, cl. 2, rendering the Board unconstitutionally created.

Recent Rulemaking Activity by the Securities and Exchange Commission Under the Sarbanes-Oxley Act of 2002

Peter L. Welsh February 04, 2003

The SEC has been extremely active lately on the rulemaking front, particularly with regard to the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley" or "SOA"). Over the past six months, the Commission has issued no fewer than ten releases containing final rules promulgated pursuant to Sarbanes-Oxley, and eight final releases have been issued in the past three weeks alone. Additional proposed rules have yet to be finalized, and the Commission is still seeking comment on certain proposed rules including a proposed requirement that, under certain circumstances, attorneys practicing before the Commission effect a "noisy withdrawal" from representation of an issuer associated with material violations of the securities laws or breaches of fiduciary duty. The following paper summarizes the various rules promulgated pursuant to Sarbanes-Oxley.

Memorandum Concerning Criminal Penalties of Section 906 of the Sarbanes-Oxley Statute

Gerald Walpin March 23, 2007

Section 906 of the Sarbanes-Oxley Act of 2002 requires financial reports filed by a corporate issuer with the SEC pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 be accompanied by a written statement of the CEO and CFO, certifying, inter alia, that the financial report "fairly presents, in all material respects, the financial condition and results of operations of the issuer." That statute also fixes criminal penalties for anyone who certifies a financial statement that does not "comport with" this requirement at a maximum of ten years imprisonment if the officer made such certificate ""knowing that the periodic report accompanying the statement does not comport with all the requirements," and up to twenty years for the same act if done "willfully."

The Public Company Accounting Reform and Investor Protection Act of 2002: Public Markets and Government Oversight

Peter L. Welsh March 24, 2007

The recent history of America’s financial markets has been dramatic. For over five years, beginning around the mid 1990s, market returns were well in excess of historic averages. The cheerleaders of the financial markets, from research analysts to financial journalists, moreover, encouraged the American public to place their personal assets at risk in a market that seemed to many simply incapable of going down. Investors were, in turn, willing to invest in the market (and in its riskiest segments), in some cases without regard to valuation, diversification or other rudimentary principles of financial economics. The rules of investing, we were assured by many experts, had changed. It turns out, after all, however, that things are not different now. Indeed, since its peak in early 2000, the NASDAQ index has fallen by over 75%. The broadly diversified, large cap S&P 500, moreover, has declined by nearly 50% from its high in early 2000. Not surprisingly, this widespread financial carnage has piqued Washington’s interest, and the first round of federal legislation directed at preventing such misfortune in the future recently passed the House and the Senate.

A Critique of the NYSE’s Director Independence Listing Standards

Stephen Bainbridge March 24, 2007
Under the New York Stock Exchange's (NYSE) aegis, a blue ribbon panel has proposed new listing standards that would, inter alia, significantly increase the role of independent directors in public corporations. Despite the considerable hullabaloo surrounding the report's release, however, the report's recommendations in fact consist of little more than the warmed-over rejects of past corporate governance "reform" initiatives. This essay critiques the key director independence provisions of the NYSE Committee's report. The essay argues that those proposals are not supported by the evidence on director performance and, moreover, adopt an undesirable one size fits all approach. Firms have unique needs and should be free-as state law now allows-to develop unique accountability mechanisms carefully tailored for the firm's special needs. The SEC should not be further empowered to use its "raised eyebrow" regulatory powers as a vehicle to federalize corporate law. For all of these reasons, the NYSE should reject the Committee's proposals and leave development of corporate governance to state law and market forces.