Hello prison, goodbye SOX (Editorial)

U.S. court decisions negate need for unproductive bureaucratic web that is the Sarbanes-Oxley Act
By John Hobel
|Canadian HR Reporter|Last Updated: 06/16/2006

They ruined the retirement plans of their employees and bankrupted America’s seventh largest public company with a fraudulent scheme that made a mockery of financial statements. But in the end justice prevailed and former Enron leaders Kenneth Lay and Jeffrey Skilling are on their way to prison.

The May verdict in the Enron case ends a sorry chapter in business where Lay and Skilling hid the firm’s financial woes in order to keep share prices high. Shares they sold before the collapse. Shares that were held by employees who were told all was rosy right up until the end. Thousands of staff lost both their jobs and their retirement savings. And Enron investors suffered as did the integrity of the stock market.

Along with destroyed lives and fortunes, the Enron scandal left another painful legacy — the Sarbanes-Oxley Act (SOX). Passed by the United States government in 2002, SOX is meant to rein in executive fraud through tighter regulations around accounting procedures and board of director responsibilities in publicly traded companies. And while it’s a U.S. law, it is also one of the biggest legislated headaches Canadian HR professionals and corporate managers have had to deal with in recent years, even competing with the need to comply with Canada’s own privacy legislation. With the amount of Canadian firms doing business in the U.S., or listed on American stock exchanges or that are subsidiaries of U.S. companies, its tentacles have wrapped themselves around the throats of Canadian businesspeople.