A thorough examination of the much ballyhooed Sarbanes-Oxley Act reveals dominantly a federal codification of extant rules, regulations, practices, and norms. Despite advertising it as "the most far-reaching reforms of American business practices since the time of FDR," a soberly apolitical view sees the Act as more sweep than reform. Important are provisions calling for nine studies; redundant but much publicized were the certification requirements imposed during the summer of 2002; other moves are mere patchwork responses to precise transgressions present in the popularized scandals. The Act is far from trivial, however. A silver bullet relates to the structure and funding of those who set the standards for auditing and accounting in the United States. Stripped of power is the AICPA, and altered in funding structure is the FASB.
All parties but Congress are singled out for a wrist-slapping (auditors, accountants, officers, directors and committee members, lawyers, securities analysts, credit rating agencies, investment banks and financial advisors, state corporate lawmakers, the SEC, the Federal Sentencing Commission and even the Supreme Court). No reexamanation of Congressional reforms relating to private securities litigation or the erstwhile barrier between investment and commercial banking appear. In fact there is implicit endorsement of the Congressional approach, rooted in the process and control philosophy of the Foreign Corrupt Practices Act, which the Act follows. This reading of the Act as modest is advanced in three stages of this Article. The first sets the background by summarizing the salient features of the dominant precipitating scandals and their times. The second stage dissects every material provision of the Act in context. The third and final stage suggests why the political rhetoric and substance diverged so widely, with illustrations of what a substantively bold Act might have looked like.
Explaining the Act's rhetoric-reality yawn requires speculation but informed hunches readily emerge. On the one hand, Congress may have understood that the visible debacles were not chronic epidemics but discrete pathologies and their root causes were market psychology beyond its regulatory reach (hence a reformless Act). On the other, Congress knew that the public perceived an acute systemic crisis of power abuse they had no responsibility for creating (hence the "sweeping" rhetoric). Another explanation, which also explains the Act's call for so many studies, is that it is too soon to diagnose deep causes or broad shortcomings but that immediate action was politically expedient. The studies bridge the gap between action and knowledge, constituting continuing threats to their targets to abide by the spirit of the Act, a threat to make the "sweeping" rhetoric real "reform."
Lawrence A. Cunningham, The Sarbanes-Oxley Yawn: Heavy Rhetoric, Light Reform (And it Might Just Work), 35 Conn. L. Rev. 915 (2003).