Title: The Sarbanes-Oxley Act and the Reinvention of Corporate Governance?
Abstract: The Sarbanes-Oxley Act (the Act), signed into law by President Bush in July 2002, creates the need to re-think the way we approach our study of corporate governance in two ways and has the potential (depending upon the results of, and actions taken in response to, various studies that are required to be completed under that Act during the next year) dramatically to change the way we think about, write about and teach corporate law. The Act makes three specific changes in the way we think about corporate governance: first, it brings into the realm of internal governance the gatekeepers that once stood outside the box, including auditors, analysts and lawyers. Second, it significantly enhances the legal status of, and centrality of corporate governance to, the chief executive officer and the audit committee, two constituents that have received very little recognition in the law and its literature. Third, both in doing this and in other respects (like the prohibition of loans to officers and certain other conflict of interest transactions), it federalizes an important dimension of the internal laws of corporate governance, creating a new (albeit arguably narrow) duty of care for the CEO and audit committee and reintroducing serious prohibitions on conflict of interest transactions that have eroded to nothingness in the hands of the Delaware judiciary and legislature.