News from the RAND Center for Corporate Ethics and Governance

Preventing and Detecting Corporate Misdeeds: Ethics and Compliance Officers Offer Advice for Policymakers

Improvements in corporate compliance, ethics, and oversight have been a significant policy goal for the U.S. government at least since the enactment of the U.S. Federal Sentencing Guidelines in 1991 and the Sarbanes-Oxley Act in 2002. Notwithstanding these earlier government initiatives, the collapse of financial markets in late 2008 has invited renewed questions about the governance, compliance, and ethics practices of firms throughout the U.S. economy. On March 5, 2009, RAND convened a conference in Washington, D.C., on the role and perspectives of corporate chief ethics and compliance officers (CECOs) in supporting organizations in the detection and prevention of corporate misdeeds. The conference brought together leaders from among ethics and compliance officers in the corporate community, as well as stakeholders in the nonprofit sector, academia, and government. Discussions focused on the challenges facing corporate ethics and compliance programs as a first line of defense against malfeasance and misbehavior; on the role of CECOs as champions for implementation in their companies; and on potential steps that might be taken by government to empower CECOs and, by extension, the corporate ethics and compliance programs that they oversee.

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President-elect Obama chooses Mary Schapiro, Advisory Board Member, to lead the SEC

President-elect Obama has chosen Mary Schapiro, Advisory Board Member to the RAND Center for Corporate Ethics and Governance (CCEG), to lead the SEC. We are encouraged that the SEC will have the benefit of her outstanding leadership. Ms. Schapiro will join Timothy Geithner, a member of the RAND Board of Trustees and nominee as Treasury Secretary, in steering the country toward economic recovery and renewed confidence in our financial markets. While we regret Ms. Schapiro will no longer be available to advise RAND, we wish her the best of luck and are committed to providing her with the unbiased, objective information she will need to be successful in her new position.

"The Unintended Effects of the Sarbanes Oxley Act of 2002" was recently listed on SSRN's Top Ten download list for "Corporate Governance & Accounting" and "Corporate Governance & Law."

The auditing profession came under intense scrutiny following the collapse of Enron and several other leading firms. Legislators responded swiftly with the Sarbanes Oxley Act of 2002, widely considered the most comprehensive economic regulation since the New Deal. An important strand in the accounting literature, led in part by authors such as DeFond & Francis (2005) and Baker (2008) suggests the law may produce serious unintended harmful consequences. This has produced a call for further research to evaluate the law's impact upon firms. This paper contributes to this literature in several ways. First, it conducts a comprehensive analysis of multiple literatures to formulate key hypotheses. Second, the strength of these hypotheses is evaluated on a random sample of Fortune 500 CEOs (n = 206), the first scholarly attempt to evaluate managerial perception of the law. The survey results generally support our hypotheses, and this knowledge is intended to improve the regulatory development process in the future. As this is not a cost: benefit analysis, no effort was made to evaluate the potential benefits of the law, and no conclusions are drawn regarding the law's net effect(s).

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