The closer one looks at SOX and its origins in the financial scandals of the early 2000s, the blurrier the picture, which lets commentators see what they want to see and draw inferences accordingly. That is why social construction is so crucial. My aim in this paper is to illuminate the social nature of SOX\u27s diffusion into practice. I will leave to the reader the judgment about whether this has been or will be good or bad, and for whom. If I seem to challenge SOX\u27s critics more than its supporters, it is because the critics have been more venomous than is fair. Venom aside, the bite still deserves attention

Langevoort, Donald C.

English

Part I will take a close look at the legitimacy of SOX by examining the two plausible stories of SOX\u27s origins and considering the early post-SOX evidence on its costs and benefits. There is no clear-cut answer to the question of how much SOX benefits investors; both positive and critical positions are plausible. Costs have been far greater than expected, but more from SOX\u27s implementation than from the legislative text. Before turning to how and why implementation has occurred that way-which to me is the central question of interpretation-Part II considers whether there is an alternative interpretation of SOX that explains its motivations and likely long term effects. This raises the possibility that SOX\u27s most important effects may be less about investor protection than about renegotiating the boundary between the public and private spaces in big corporations, a much deeper ideological issue. The legislation may reflect a political instinct that incentive structures in modem public corporations generate risks that require public (not just investor) accountability to be legitimate. I suggest the  independent  director, currently seen largely as an investor advocate, is being pushed toward becoming a  public  director whose main assignment is to keep risks and rewards in a socially acceptable balance. Part III then turns to the various interpretive communities debating SOX\u27s meaning, anticipates how they are likely to respond, and considers the resulting behavioral impact of their criticism or praise. In Part IV I predict, consistent with neither enthusiasm nor harsh criticism of the legislation, that the interpretive pluralism will gradually moderate both costs and benefits, slowly tilting toward the  public values  account described in Part II. Part V addresses the most specific criticism of SOX, involving so-called going-dark transactions and the impact on foreign issuers. I conclude by connecting SOX to larger questions about how law becomes part of social and economic practice

University of Michigan School of Law

The Social Construction of Sarbanes-Oxley

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https://repository.law.umich.edu/cgi/viewcontent.cgi?article=1429&amp;context=mlr

The Social Construction of Sarbanes-Oxley

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University of Michigan School of Law

NELLCO Consortium Legal Scholarship Repository

bepress Legal Repository

bepress Legal Repository

Georgetown Law Scholarly Commons