Osler, Hoskin, & Harcourt LLP Distinguished Lecture:
Debating the Uncertain Future of the Sarbanes-Oxley Act

Photo by Greg Black

Professor Roberta Romano of Yale Law School delivers the second Osler, Hoskin & Harcourt LLP Distinguished Lecture in Business Law to a large crowd of students and faculty in Ban Righ Hall on February 27, 2009.

Queen's Law welcomed Professor Roberta Romano of Yale Law School as the second Osler, Hoskin & Harcourt LLP Distinguished Lecturer in Business Law on February 27, 2009. An internationally recognized corporate law scholar, Romano spoke to the large crowd in attendance about the future of the controversial accounting reform legislation enacted in 2002, the Sarbanes-Oxley Act.

The Sarbanes-Oxley Act, also known as "SOX," arose out of the controversy of the accounting scandals, followed by the fall of corporate giants such as Enron, Tyco International, and WorldCom. Designed in response to the public outcry, the legislation has ushered a broad array of corporate governance reforms designed to strike at the root causes of corporate fraud.

Romano's paper focused on the issues that have cropped up since its inception. Her research drew her to section 404 of the Act, which provoked criticism over the compliance difficulties of small firms to produce internal control reports, given the staggering costs. This issue became politically charged in the United States, particularly as the public was vehemently supportive of small businesses.

"In general, if you have the word ‘small' in front of it, the public opinion is much more positive," Romano joked. "If you put the word ‘big' there, it's much more negative."

The flaws in SOX were also evident on other levels -- some businesses found that they were losing ground to companies in other countries where the Act did not apply. The changed political landscape in the United States with the new Democratic government, coupled with the weakening economic environment, will likely push interest in legislative reform, particularly of section 404, to the back burner.

"Although I think at some point we're going to see small firms not having to completely comply [with the Sarbanes-Oxley Act], it will take years," said Romano. "It could take considerable time before most serious flaws are addressed. Currently, it's not on their attention until the serious panic and crisis has been dealt with."

Stephen Sigurdson, Law '84, a managing partner of Osler, Hoskin & Harcourt LLP, returned to his alma mater to comment on Romano's paper from a practitioner's perspective. Drawing on the popular maxim that "bad facts make bad law," he indicated that the poor situation in New York during the height of the Enron corporate collapse may have rushed the drafting of SOX.

Addressing the specifics of SOX and section 404, Sigurdson suggested that the criticisms of the Act, right or wrong, were the result of circumstance, noting that although the process was burdensome and far more expensive than the drafters could have expected, in the following years, the continuing costs have proved to be less cumbersome. However, he agreed largely with Romano's view.

"I leave you with the thought," Sigurdson said, "that some of the imperfections may simply be due to the fact that the goal of the legislation was and continues to be unattainable; to create a framework that will put an end to securities fraud."

Students and professors in attendance were given the opportunity to ask questions of the guests, which garnered more insight into the implications of SOX. One astute question about the problematic definition of materiality in the Act demonstrated that, although the accounting language may have changed, the interpretation in practice has remained largely static.

Afterwards, the attendees adjourned to the Fireside Room to enjoy their opportunity to mingle with the guests during the wine and cheese reception.

"I really enjoy the diverse views the Osler series offers," said Richard Roskies, Law '10; currently enrolled in the accompanying individual supervised project in business law under the supervision of series director Professor Paul Miller, he has attended each lecture. "Most of the time in the classroom, we're reading the theories written in the textbooks, but it's largely framed historically. The thing I appreciate the most about having the guest speakers is that they can speak critically as to how this affects the world today, it is very much in the now."

To watch a recording and see more pictures of the lecture, please visit http://law.queensu.ca/events/oslerDistinguishedLecturesInBusinessLaw.html