Symposium Foreword - After the Sarbanes-Oxley Act: The Future of the Mandatory Disclosure System

Abstract

The Sarbanes-Oxley Act of 2002, which Congress overwhelmingly passed, is proving to be the most important federal corporate governance and securities legislation in seventy years. The debate rages on over whether Sarbanes-Oxley's substantive requirements are good policy that will result in better corporate governance and corporate performance over the long haul. Whatever else one might think of Sarbanes-Oxley, though, a strong regulatory response from Congress was needed on the heels of Enron, WorldCom, and a collapsing stock market to boost investor confidence. Although portions of Sarbanes-Oxley received careful attention in their crafting, much of the legislation was drafted hastily and under intense political pressure. In the overall haste to get something done, Congress focused on specific aspects of corporate governance and the federal mandatory disclosure system and in many instances, simply called for more disclosure. What Congress did not have the time to do was study the mandatory disclosure system more comprehensively. This matters, because federal securities regulation is best understood as a complex system and not as a bunch of independent parts that can be tweaked or even overhauled on a one-off basis to create an effective regulatory regime. The goal of the symposium for which this foreword was written was to take a step in the direction of a comprehensive review of the mandatory disclosure system in the aftermath of Sarbanes-Oxley. The symposium focused on three key aspects of mandatory disclosure: (1) what should be disclosed and how; (2) how should compliance with the federal securities laws be ensured; and (3) should issuers have more choice among competing regulatory regimes. The symposium benefited from the written contributions of Jim Cox, Jonathan Macey, Kathleen Brickey, Kim Krawiec, Stephen Cutler, Hillary Sale, Murray Weidenbaum, Joel Seligman, and Troy Paredes. It is still to early to tell what the net impact of Sarbanes-Oxley will be. The true test of the legislation will not come until the markets and regulators become lax during the next bull market. The hope, though, is that by having routinized a host of new governance and disclosure practices, Sarbanes-Oxley will prevent a wave of scandal from spreading throughout the markets next time.