The Sarbanes-Oxley Act and Corporate Coruption

Most of us think about the Coca-Cola Company in a positive light because it continues to bring us what is arguably the tastiest soft drink around. One would expect that a company that describes itself on its website as “a company that exists to benefit and refresh everyone it touches” and has been so successful for years would have a corporate culture and code of ethics that matches this image. However, a closer look at the Coca-Cola Company, its corporate culture and allegations of corruption paint a less than rosy picture of the soft drink leader. A Coca-Cola employee named Matthew Whitley made a splash when he was fired on March 26, 2003 and then sued the Coca-Cola company a couple of months later for the large sum of forty five million on the grounds that he had been fired in retaliation for raising concerns about accounting fraud and other misconduct. He was fired just five days after sending his allegations to the company's top lawyer. When Coke balked, Whitley turned for relief to a new legislation: the Sarbanes-Oxley Act of 2002. He filed for whistle-blower protection under the act’s section 806 provisions and initiated federal investigations into the Coca-Cola Company.

The corporate world has been rocked by scandals occurring in well-known companies such as Enron and WorldCom. These blatant examples of fraudulent financial reporting and related corporate corruption created the necessity for more stringent and comprehensive laws and punishments to avoid such corporate scandals in the future. On July 30, 2002 President Bush signed into law the Sarbanes-Oxley Act of 2002. The law was enacted to bolster public confidence in our nation’s capital markets. It imposes new reporting requirements and significant penalties for non-compliance on public companies and their executives, directors, attorneys, auditors and securities analysts. In my opinion, one of the significant provisions of the Act, that covers companies registered under section 12 of the Securities and Exchange Act of 1934, provides federal protection for “whistleblowers”. The Act requires that companies covered in the Sarbanes-Oxley Act should encourage employees to come forward and provide management with information regarding potential corporate fraud. It also specifically prohibits employers from retaliating against employees who provide such information. This Act was passed as a result of Enron’s attempted retaliation against Sherry Watkins who blew the whistle on the company. It’s purpose seems to be to enable ethical employees help keep management abreast of unsavory activities that will in the long run not only harm employees, stockholders and other stakeholders, but as past experience has shown will often lead to the demise of the company.