Compliance’s Next Challenge: Polarization

By Miriam H. Baer September 7, 2023 by renholding

Last year marked the 20^th anniversary of Congress’ enactment of the Sarbanes-Oxley Act, legislation that arose in response to Enron’s demise and the accounting scandals that followed, and which coincided with the successful and much-heralded prosecution of a …

How Institutional Ownership and Board Diversity Affect Innovation

By Thi-Thanh Phan and Hai-Chin Yu February 1, 2023 by renholding

In a new paper, we investigate the relationships between institutional ownership, board diversity, and corporate innovation in U.S.-listed firms. Institutional investors play a crucial role in a firm’s operation and exert considerable influence on the efficient monitoring of innovative investment. …

Assessing the SEC’s Role As Enforcer Against Financial Misconduct

By Chuan Chen, Yanrong Jia, Xiumin Martin and Bernardo Silveira January 10, 2023 by renholding

The Securities Exchange Act grants the SEC ample authority and discretion to investigate and seek sanctions related to violations of the securities laws, with the goal of protecting investors; maintaining fair, orderly, and efficient markets; and facilitating capital formation (SEC, …

SEC Chair Gensler Speaks to Investor Advisory Committee

By Gary Gensler September 22, 2022 by renholding

Thank you. It is great to speak to the Investor Advisory Committee (IAC). As is customary, I’d like to note that my views are my own and that I am not speaking on behalf of the Securities and Exchange Commission …

Paul Weiss Discusses Second Circuit Ruling on Intent Element of a SOX Whistleblower Claim

By Geoffrey R. Chepiga, Andrew J. Ehrlich, Lorin L. Reisner, Audra J. Soloway and Daniel S. Sinnreich August 19, 2022 by renholding

On August 5, 2022, the Second Circuit held that individuals claiming they were terminated in retaliation for protected whistleblower activities under Sarbanes-Oxley must prove that their employer acted with retaliatory intent. Murray v. UBS Securities LLC, No. 20-4202 (2d …

How Auditors Helped Spread Stock-Option Backdating

By Aharon Mohliver August 17, 2022 by renholding

Stock-option backdating, the practice of changing the reported date of a stock-option grant to an earlier date, proliferated in the 1990s and early 2000s, with nearly one-third of public corporations engaging in it, according to some estimates (Heron and Lie, …

How Accounting Employees’ Incentives Affect Financial Reporting Quality

By Christopher S. Armstrong, John D. Kepler, David F. Larcker and Sean X. Shi June 7, 2022 by renholding

An extensive body of literature that spans accounting, corporate finance, management, and other adjacent disciplines examines the relationship between senior executives’ contractual incentives (e.g., bonus plans, stock and option holdings) and various properties of their firms’ financial reporting and disclosures. …

How Sarbanes-Oxley Changed Firms’ Responses to Announcements of Earnings Restatements

By Jo-Ellen Pozner December 14, 2021 by renholding

Among the many goals of the Sarbanes-Oxley legislation was to increase CEOs’ accountability for the veracity of financial statements by requiring that they personally certify financial disclosures. Although that provision has not led to successful prosecutions of offending executives, our …

How Generalist and Specialist CEOs Compare in the Eyes of Independent Directors

By Pattanaporn Chatjuthamard, Pornsit Jiraporn and Sirimon Treepongkaruna November 5, 2021 by renholding

The benefits and drawbacks of generalist CEOs – those with the talent and skill to manage companies in various industries – have been fiercely debated in contemporary research. Some research touts generalist CEOs’ varied professional experiences and ability to launch …

How Can We Tell Whether Compliance Programs Work?

By Melissa Rorie and Benjamin van Rooij September 3, 2021 by renholding

In the United States, major financial scandals in the 1970s, 1980s, and 1990s resulted in federal pressure on corporations to inculcate ethical behavior in their employees. The Foreign Corrupt Practices Act, Federal Sentencing Guidelines, Sarbanes-Oxley Act, the U.S. Organization Sentencing …

Do Lawyers Make Good Gatekeepers?

By Sung Hui Kim July 1, 2021 by renholding

Do lawyers report evidence of material violations up-the-ladder at the companies they represent, as the Sarbanes-Oxley Act and related regulations require? Have general counsel properly investigated those reports? Can we trust lawyers to be effective gatekeepers and stop corporate misconduct? …

Corporate Law Professors on Public Company Boards

By Lawrence A. Cunningham February 13, 2020 by renholding

Since passage of the Sarbanes-Oxley Act of 2002, public companies have been more enthusiastic than ever about appointing independent directors with specific expertise. They have often reached into the academy to recruit university professors, where expertise and independent thought thrive. …

The Readability of Company Responses to SEC Comment Letters

By Cory A. Cassell, Lauren M. Cunningham and Ling Lei Lisic August 12, 2019 by renholding

The Securities and Exchange Commission published its Plain English Handbook in 1998 with a goal of promoting “clearer and more informative disclosure documents” (SEC 1998). Warren Buffet authored the preface, where he states, in part:

For more than forty years, …

The Costs of Complying with SOX’s Internal-Controls Audit Requirement

By Jenny McCallen, Roy Schmardebeck, Jonathan E. Shipman and Robert Lowell Whited July 29, 2019 by renholding

Section 404(b) of the Sarbanes Oxley Act (SOX) requires auditors to test and report on the effectiveness of internal control over financial reporting (ICFR) for accelerated and large accelerated filers. Although Iliev (2010) documents substantial costs to initially comply with …

SEC Proposes to Exempt More Firms from Required Attestation of Internal Controls

By Colleen Honigsberg and Shivaram Rajgopal July 15, 2019 by renholding

The Securities and Exchange Commission has proposed changes to its rules requiring companies to obtain attestation on their internal controls from an independent public accountant. The proposal rests on the idea that attestation’s costs often exceed its benefits. The SEC’s …

SEC Chairman Clayton Comments on Proposed Amendments to Sarbanes-Oxley

By Jay Clayton May 10, 2019 by renholding

Good morning. This is an open meeting of the U.S. Securities and Exchange Commission, under the Government in the Sunshine Act. Our only item on the agenda today is a recommendation from the Division of Corporation Finance to propose amendments

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SEC Commissioner Jackson Dissents from Proposed Amendments to Sarbanes-Oxley

By Robert J. Jackson, Jr. May 10, 2019 by renholding

Thank you, Mr. Chairman, and thank you to the Staff in the Division of Corporation Finance, including John Fieldsend, Elizabeth Murphy, Felicia Kung, Lindsay McCord, and Director Bill Hinman, for their work in developing today’s release. I also appreciate the

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How Private Equity Enhances the Market for Corporate Control and Capitalism

By Edward Peter Stringham and Jack Vogel September 13, 2018 by renholding

In this age of firebrand political rhetoric and sniping from the right and the left, Wall Street has taken more than its fair share of criticism. One of the most significantly misplaced criticisms, however, derives from a gross misunderstanding of …

The Revolving Door between the PCAOB and Large Audit Firms

By Bradley E. Hendricks, Wayne R. Landsman and F. Dimas Peña-Romera August 2, 2018 by renholding

In a recent study, we examine the flow of workers between the Public Company Accounting Oversight Board (PCAOB) and large U.S. audit firms. The PCAOB, created by the Sarbanes-Oxley Act of 2002, oversees the audits of public companies by, among …

The Consequences of Strong v. Weak Clawback Provisions

By Michael H.R. Erkens and Ying Gan July 18, 2018 by renholding

Clawback provisions authorize firms to recoup compensation from executives upon the occurrence of financial restatements or executive misbehavior. The first clawback provision in U.S. federal law was Section 304 of the Sarbanes-Oxley Act of 2002 (SOX 304). SOX 304 requires …

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Sarbanes-Oxley