CORPORATE FRAUD, SARBANES-OXLEY, AND CORPORATE CULTURE

In a previous paper entitled “The Sarbanes-Oxley Act: A Cost-Benefits Study,” the authors examined early effects of SOX which was enacted by Congress in 2002 in an attempt to protect investors and to renew confidence in business and financial data. The focus of this paper is on organizational culture and ethics as integral to business strategy. Although reporting of financial transactions should be transparent and some rules and regulations are essential as is contract law, it should be noted that strengthening of core values can foster an ethical culture. In such an organizational environment, firms could gain employee confidence and loyalty as well as credibility with investors. Such enhances better relationships with all stakeholders and results in reduced financial, legal, and reputational risks while simultaneously improving organizational performance. The era of Enron ushered in some of the biggest financial debacles of the last century. Enron not only went bankrupt but in doing so caused the retirement funds of its employees, of whom the vast majority were honest hard working people, to vanish. A