Former U.S. Rep. Michael G. Oxley, co-author of the landmark Sarbanes–Oxley Act of 2002, died January 1, 2016, at age 71. Oxley represented Ohio's Fourth Congressional District for 25 years, and served as Chairman of the House Financial Services Committee from 2001 through 2006.
The Sarbanes-Oxley Act (or "SOX") was enacted July 30, 2002, in response to a series of massive accounting scandals involving public companies such as Enron and Worldcom. Among other things, SOX required corporations' annual financial reports to include an Internal Control Report; made it a crime for any person to corruptly alter, destroy, etc. documents with the intent to impair the document's integrity or availability for use in an official proceeding; created significant criminal penalties for certifying a misleading or fraudulent financial report; created the PCAOB; created the SEC's Fair Funds process; and much more.
In March 2012, Oxley sat for an interesting interview for the Securities and Exchange Commission Historical Society's Oral History Project. In the interview, Oxley recounted the tumultuous events leading up to the passage of SOX, and how the law came to be passed. Oxley said he would change certain things about SOX if he had the opportunity to rewrite it. For example, he said he would not have passed Section 404(b), which requires public companies to have an independent external auditor attest to internal controls over financial reporting -- a costly and burdensome requirement for many companies.
Overall, however, Oxley said the true test of SOX is whether there has been a recurrence of the corporate fraud meltdowns that led to its passage. From that perspective, Oxley noted, in the decade following SOX
We’ve had nothing even close to an Enron or a WorldCom. People forget, we lost $8 trillion in market cap as a result of the Enron, WorldCom and others – $8 trillion. $8 trillion. Every investor, whether he was invested in Enron or WorldCom or not, lost money in that period. Go back and look. I just looked at my own personal 401(k). In 2002, it went down like 26 percent. Twentysix percent. Virtually everybody can say the same thing. So when the CEOs complain about SOX, I ask them, “What was your market cap on July 30th, 2002” – which is the day the President signed it – “and what is it now?”
Oxley also joked that he and SOX's co-author Sen. Paul Sarbanes, whom Oxley had never even met prior to the hearing leading up to SOX, ended up giving speeches together all over the world about the bill and "developed a little bit of a Martin and Lewis kind of a shtick." Oxley said that "one of my stories was that I always tell people that I got a new first name. Sarbanes would say he would go back to Maryland and they couldn’t understand how his last name became hyphenated."