The Enduring Legacy of Sarbanes-Oxley

Once-recognizable signatures reduced to illegible scribbles.

The Sarbanes-Oxley Act of 2002 was enacted in, you guessed it, 2002. This federal legislation was developed as a reaction (some might say “overreaction”) to a number of corporate financial scandals, including: Enron, Tyco, and WorldCom. As Gordon Gekko (wait a minute, doesn’t he do insurance commercials?), the character played by Michael Douglas, in 1987’s Wall Street, suggests, “Greed is good.” Until it isn’t.

And, I suspect there are thousands of former Enron employees, whose 401k accounts were stuffed with Enron stock, who would argue that greed was not such a good thing for them.

Sarbanes-Oxley, sometimes referred to in shorthand as “Sarbox,” or “SOX,” was named for its creators, U.S. Senator Paul Sarbanes (D-MD), and U.S. Representative Michael G. Oxley (R-OH), and includes eleven sections outlining new financial reporting and accountability requirements for public companies. But, you don’t turn to Rule of Three for a comprehensive analysis of complex federal regulations, right? If you do, then you have serious problems, my friend.

No, I would instead like to point your attention to a specific component of the SOX act, that being Section 404, which is entitled, “Assessment of Internal Control.” This section is the one which caused me, and, I suspect, countless other senior finance management professionals, tremendous pain and suffering, from which I will never recover.

You see, the language contained in Section 404 demanded that public companies, and their auditors, report on the adequacy of internal controls regarding financial reporting, but didn’t necessarily specify how to accomplish that task. So, interpretation was ceded to the imagination of each company, and their auditors.

Let’s say that, hypothetically, a public company which owned newspaper publishing properties in the state of Michigan at that time, was managed by a handful of former auditors, who mandated that appropriate internal controls should include the stipulation that the senior finance management professional at each property must review and approve (via his physical signature) every single purchase order, invoice, journal entry, payroll time card, inventory log, and any other piece of paper evidencing a transaction of any sort, involving the organization, in any way, shape, or form.

I think you see where I’m going with this. In addition to developing a severe muscle cramp from signing my name, over and over, all day long, my previously legible signature deteriorated into a completely unrecognizable scribble. Not only does this practice elicit raised eyebrows, and reactions such as, “Really, that’s your signature?” from notaries, and mortgage brokers, and bank tellers, I’m also coming to grips with the fact that, if I were asked to sign an important document such as the Declaration of Independence, no one would know that I had signed it, because they wouldn’t be able to decipher it, and connect it to me - my legacy is lost forever. Sure, John Hancock, everybody knows, but me. . .bupkis.

My intention is to seek redress from Senator Sarbanes and Representative Oxley for this severe disability with which I have become afflicted. I have begun attending ISA meetings on a regular basis - you know, “Illegible Signatures Anonymous.” (“Hi, my name is Bill, and my signature is completely illegible.”) I’m only up to step four, but, after all these years, I finally have hope that, one day, my signature can be restored to its former legible status. And, it’s nice to know that I do not need to suffer alone; I’m surrounded by dozens of senior finance management professionals who have been similarly afflicted.

A thought occurs to me, however - one which might help to shore-up the legacy gap. I believe that, years from now, Mssrs. Sarbanes and Oxley will still be remembered for their role in crafting this meaningful legislation which revolutionized corporate financial reporting and accountability, and, incidentally inflicted untold pain upon senior finance management professionals nationwide. Why couldn’t there be a home for the “Rule of Three Act of 2023”? (I think I missed the boat on 2022 already, given the relaxed pace of congressional sessions planned for the balance of the year).

Hmm. . .what meaningful regulations would the Rule of Three Act include? As you might imagine, I envision three major planks in this bill:

• A pronouncement that time logged in a recliner be recognized as equivalent to time spent engaging in aerobic activity, as it pertains to general health and well-being.

• Providing subsidies to importers of single-malt scotch, such that the average retail price of such goods could be reduced by half, encouraging the daily consumption of this life-giving elixir.

• Creation of a 19-day holiday period each year, coincident with the start of “March Madness,” and concluding after completion of the NCAA championship game, enabling all to focus their energies on the important matters of viewing endless hours of high-level college basketball (in the spirit of reaching across the aisle, and achieving bipartisan agreement, “First Four” play-in games have been sacrificed in this bill).

I think you’ll agree with me that this important Rule of Three Act of 2023, sometimes referred to in shorthand as “Rulot,” or ROT,” is a necessity, and, once ratified, will be embraced by the general populace, and cherished for years to come (and, added bonus: no senior finance management professionals were harmed in the making of this bill).

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