I ask the question not because I believe they are warranted, but rather because we have been discussing comparisons between this new Act and Sarbanes-Oxley and those comparisons got me thinking about one striking difference between the two acts in terms of the emphasis on criminal sanctions. With Sarbanes-Oxley, there was a lot of discussion about the need for personal accountability, which ultimately translated into a push for increased liability for corporate executives, and hence provisions imposing enhanced criminal penalties related to various frauds, including sanctions for executives' false ceritification of financial reports. This time, such a push has not been a central focus of reform efforts. In fact, even though this new Act uses the term "accountability," it does not even have the same connotation as it did under Sarbanes-Oxley. Which raises the question, why not? Here are some possibilities.
1. Perp Walk Fatigue. Certainly the debacles associated with Enron and other corporate giants featured a lot of "perp walks" as evidence of the government's efforts to curb misconduct. Perhaps the American public no longer has the appetite for such perp walks. Indeed, perhaps the fact that the first criminal case of executives accused of conduct stemming from the financial crisis ended in acquittal reflects this lack of appetite. Of course, it also could just indicate that the complexity of this current crisis does not lend itself to the kind of criminal prosecutions we saw last time. Moreover, it suggest that the perp walk may not have the same impact in the context of this current crisis, and hence reform efforts cannot have the same emphasis.
2. All Out of Sanctions. In light of the emphasis on criminal sanctions under Sarbanes-Oxley, perhaps the lack of emphasis in these new reforms suggest that we already had reached a ceiling, or close to a ceiling, with respect to increasing criminal sanctions in this area--and hence there was no new ground to cover. Of course, one can argue that this potential did not stop us before. That is, many people criticized Sarbanes-Oxley precisely because it appeared to impose additional penalties related to conduct for which penalties already existed.
3. Been There, Done That. Another possibility is that we have come to realize that enhanced criminal sanctions have a limited impact in terms of their ability to prevent corporate fraud and other forms of misconduct. Indeed, one could argue that the fact that our last reform effort focused on enhanced penalties, and yet failed to prevent this current crisis, suggest something about the utility of such a focus. To be sure, given the complexity of this current crisis, drawing such a conclusion may be entirely inappropriate, but it nevertheless may have played a rule in the relative de-emphasis on criminal sanctions under this new Act.
4. Once Bitten, Twice Shy. Then too, it could be that the Supreme Court's reaction to the use (and some would say over-use) of criminal sanctions in cases like those involving Arthur Andersen and Jeff Skilling, has made us reluctant to rely on such sanctions.
5. No Bad Guys (or Gals), Just Bad Companies. Another possibility is that, unlike before, there are no clearly identifiable executives accused of wrong-doing who have become (or can become) household names. And perhaps the fact that we cannot pinpoint many bad guys (just the bad companies) makes it hard to utilize the criminal sanction process. This observation also could just confirm the broader nature of this crisis as opposed to the one Sarbanes-Oxley was aimed at tackling.
Whatever the reason--and I am sure people can think of more--it does seem like one stark difference between Sarbanes-Oxley and this new Act is the virtual lack of emphasis on enhancing criminal sanctions. I am not sure if that is a theory or theme, but it certainly struck me as a key change.
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