SAP - TINET - Tarragona Internet

Being SOX-compliant means that companies are allowing investors to make

informed decisions with clean, up-to-date, and management-certified informa-

tion. Misinformation, whether intentional or not, is now punishable by law.

This insistence on clean information levels the playing field for investors and

shareholders. Instead of operating in the dark, they can now see the light.

Who Are Sarbanes and Oxley, Anyway? ......................................................

The Sarbanes in Sarbanes-Oxley, is Paul Sarbanes, a lawyer and Democratic

senator who represented Maryland in the Senate from 1977–2007. Elected to

the House of Representatives in 1970, Sarbanes sat on the House Watergate

Committee in 1974 to introduce the first Articles of Impeachment for obstruc-

tion of justice against President Richard Nixon. In 2002, he was the Senate

sponsor of the Sarbanes-Oxley Act. Michael G. Oxley was a Republican

member of the House of Representatives for Ohio, from 1981–2007. In 2002,

he was chairman of the House Financial Services Committee, giving him pri-

mary responsibility for Sarbanes-Oxley on the House side.

92 Part II: Diving into GRC

The scandals: How bad were they?

The names Enronand WorldComhave become

synonymous with scandal, and for good reason:

The scope of their misdeeds is staggering. The

Enron debacle is estimated to have wiped out

some $60 billion in shareholder value, whereas

WorldCom lost roughly $175 billion worth of

investors’ money. WorldCom’s $103 billion bank-

ruptcy filing in 2002 was the largest in U.S. his-

tory; Enron’s $63 million filing in 2001 was the

second largest.

In the wake of the scandal, Enron laid off nearly

all of its 22,000 employees, and WorldCom cut

its staff by 5,100 before heading into bankruptcy.

Many of those employees lost pensions, retire-

ment savings, and college tuition funds.

And because many pension funds around the

country had invested in Enron and WorldCom, the

ripples from the scandals spread far and wide.

For example, the Florida’s state pension fund lost

$335 million when Enron went bankrupt. The

Oklahoma Teachers Retirement System lost $17

million before selling its holdings in WorldCom.

The scandals also set off a wave of investiga-

tions into the accounting practices of other cor-

porations including Tyco, Qwest, and Coca Cola.

The scandal even had political ramifications.

Many questioned the Bush administration’s

close ties to Enron officials; California residents

recalled their governor, Gray Davis, and elected

Arnold Schwarzenegger in part because of the

state’s power crisis, a crisis in which Enron

played a role.

Historian Joel S. Seligman told The Washington

Postthat Enron “was the most important cor-

porate scandal of our lifetimes. It was one of the

immediate causes of the Sarbanes-Oxley Act,

the governance reforms of the New York Stock

Exchange and NASD, and the most consequen-

tial reorientation of corporate behavior in living

memory.”