Two decades of Sarbanes-Oxley

July 30 marked the 20th anniversary of the Sarbanes-Oxley Act, a sweeping piece of legislation pushed forward by Congress in an effort to improve auditing and public disclosure standards. The act was implemented after a series of infamous accounting scandals in the early 2000s (most specifically Enron).

As the decades pass: “It can be argued that the act has been a great success—it fundamentally changed the relationship between the company and the audit/auditor,” the Harvard Law School Forum on Corporate Governance wrote late last year, adding that the act “sparked the corporate responsibility movement.”

21st-century finance recruiting: In the years since, the act fundamentally changed the skills that organizations looked for in finance professionals and the way public companies hired, recruited, and trained finance employees—when “Sarbanes-Oxley was rolled out at that point, every public company out there needed a technical CFO, to help implement SOX, so we were seeing an influx of big four partners become public company CFOs,” Josh Crist, co-managing partner at Crist Kolder Associates, a boutique search firm that focuses on CFO and direct-report placement, told CFO Brew.

SOX today: While finance leaders initially saw the act as another grueling task on the checklist, Patty Salkin, managing director at Deloitte, told CFO Brew that companies are beginning to view it as a risk exercise versus a compliance measure. Salkin said in the past 20 years, there’s been significant macroenvironmental change—“M&A activity, globalization of businesses, outsourcing of business…technology, and automation.”

“With all of those changes, that means that SOX programs also have evolved,” she added, but only in certain areas.

Instead of simply a reporting measure, companies have begun to see the SOX process as a risk-management tool, and are increasingly consulting accounting firms for further Sarbanes-Oxley advice. And 184 of Fortune 500 and S&P 500 CFOs have a public accounting background, with PriceWaterhouseCoopers and Ernst & Young producing the most CFOs, according to a 2021 study from Crist Kolder.—KT & DA