The article discusses the provisions of the newly implemented law known as the Sarbanes-Oxley Act. The legislature of the United States of America passed the law so as to minimize the ongoing fraudulent acts in the profit-making public companies. The USA contains a high number of non-profit organizations whose primary aim is to offer charity services to the needy and disaster-stricken areas. However, the increasing cases of fraud in the non-profit making organizations in the USA led to the adoption of the act by the agencies too. The article further discusses the provisions of the law and the penalties for those found violating the laws contained in the bill.
There are two major legal issues raised by the article. They are financial disclosure and employee protection/safety. The two problems continue to affect both the profit-making and non-profit-making organizations in the United States of America.
The three legal matters play a significant role in the current world of operations. It is crucial for every business organization to disclose its financial transactions and statements to the staff members and the public so as to maintain confidence. Attempts to conceal financial information from the public leads to a curiosity that leads to the collapse of the business. Employees are the backbone of each company. Business organizations must ensure the protection of workers rights to ensure the smooth running of the enterprise. Each employee should have the right to speak on any corrupt deals happening in business without victimization.
The problems in both the profit and non-profit organizations in the USA were avoidable had the government set clear laws and penalties regarding financial disclosure. The entire management of the companies could be accountable for any loss of money due to fraud. Had there been strong existing worker protection policies, the employees would be vocal in disclosing the existing the cases of fraud.
The Sox act, however, affects the ethical business decision making in the current business environment. The ethical decision making in many organizations is solely in the hands of the management. The employees do not get involved in the process. The provision of employee protection in the act will force workers to demand involvement in decision making. The net result will be a cumbersome process that will slow down the whole process. The penalties in the Sox law are very harsh and will go a long way in restoring order in business organizations. For example, the twenty-year prison term to the managers who conceal financial information will restore discipline to a significant extent.
Several things can be done to solve the current problem. Cultivation of ethical role models, encouraging pushback, and demonstration of ethical decision making will restore normalcy in business organizations. Ethical behavior emanates from the top by having leaders who motivate their employees to emulate their personal practices. The actions of an organizations leadership are critical in ensuring ethical decision making in business. Enterprises ought to cultivate influencers who can shape peoples attitudes in the enterprise. The influencers will act as role models to others working in the organization. Finally, employees ought to have permission to question decisions that the management makes. Managers and CEOs should encourage their workers to give opinions on the decisions they make. The government should also consult the business community before coming up with laws that affect them.
Yallapragada, R. R., Roe, C. W., & Toma, A. G. (2010). Sarbarnes-oxley act of 2002 and non-profit organisations. Journal of business and Economic research, 89.
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