Remembering Michael Oxley: Anti-Fraud Congressman
What is Sarbanes without the Oxley?
Everything and more if we continue to fight fraud with a vengeance. If ever there was a New Year’s resolution to be had, there’s no better time than now to kick anti-fraud efforts into high gear as a way to honour Michael Oxley.
The man who co-sponsored the landmark Sarbanes-Oxley legislation, requiring corporate executives to be accountable for company financials following the disastrous accounting scandals of Enron and WorldCom, has died at age 71.
The legislation had a bit of a rocky start. When the Enron scandal first unraveled in late 2001, followed by other stories, little was done at that time. Some hearings were held and a number of bills were introduced to address corporate misconduct. However, there were different beliefs between the Senate and the House of Representatives and White House on what to actually do about the issues and how to address the problems. At the time, it appeared that any effort was grinding to a halt.
Then in 2002, we learned of the next batch of scandals by WorldCom and Adelphia that inevitably did not have any positive outcome on the stock market. In fact, at a time when fall elections were looming on the horizon and everyone is scrutinizing your every move, Congress finally passed the Sarbanes-Oxley Act. President Bush, who had earlier expressed skepticism about some of the bill’s main provisions, signed the act into law on July 30.
There’s a section within Sarbanes-Oxley that gets us a little excited as it’s but one section of the legislation that aims at maintaining public trust, and that’s the implementation of whistleblower policies.
Section 301 of SOX requires public companies to establish effective programs and procedures for handling the concerns and complaints of whistleblowers. The section states that employees should be able to report financial and accounting misconduct, as well as fraud, without fear of retribution of any kind.
Of course the benefits of whistleblower programs aren’t just limited to publicly traded companies. We’ve seen the statistics scattered around the industry. Most fraud is uncovered by an anonymous employee tip. Anonymous third-party hotlines are a way to collect a great deal of insight into the inner workings of a company that may not normally be known to upper management. As well, we recently wrote about (here) how whistleblower hotlines are a great avenue to express ‘moral anger’, aimed at defending others and benefiting the greater good.
From 1969 to 1972, Oxley worked for the Federal Bureau of Investigation and became active in the Ohio Republican Party. He served in the Ohio House of Representatives from 1973 to 1981. He was elected a US Representative in 1981 in a special election to fill the vacancy caused by the death of US Representative Tennyson Guyer.
Oxley died on January 1st in McLean, VA, the cause non-small cell lung cancer, which can afflict non-smokers.
There’s been much progress over the years in the way of making companies and employees more accountable for their actions. Many organizations are acknowledging the downside of ignoring internal fraud, bribery and corruption and have implemented third-party programs. Others are still nursing their belief that the ‘it won’t happen to us’ mantra includes them.
But with the death of this highly important figure, who helped mold the existing financial and securities regulations we see today, should come a renewed effort from companies to step up their fight against fraud and other misconduct. It would be a shame to see Michael Oxley’s efforts be made in vain. Not many of us have the privilege of having our names associated with enacted laws that become part of our lexicon!