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A law that's uncooked books

The post-Enron law that holds US firms more accountable has more than paid for the costs of compliance.

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Yet another corporate executive fell last week in a US accounting scandal. Gregory Reyes, ex-CEO of Brocade Communications, was found guilty of backdating his stock options. The conviction reveals the renewed intolerance in America for financial fraud ever since the big Enron-type scandals of a few years ago.

Last month, former media mogul Conrad Black was convicted of mail fraud while heading up Hollinger International. Before that, former leaders at Tyco, WorldCom, Adelphia, and Qwest met justice, reflecting in part a more aggressive stance for corporate accountability by the US Justice Department.

But the fact that there are not as many new scandals emerging these days in publicly listed companies can be attributed to a post-Enron law that Congress enacted to tighten the nation's corporate accounting system.

Five years ago this summer, the Sarbanes-Oxley Act, known as SOX, began to calm shaken financial markets and restore faith in American corporate governance by setting more rigorous accounting standards. When President Bush signed the law, he promised that the same ethics would apply for companies as elsewhere in American society. "The honesty you expect in your small businesses, or in your workplaces, in your community or in your home, will be expected and enforced in every corporate suite in this country," he stated.

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