Sarbanes-Oxley Purpose is Being Misapplied

Sen. Paul Sarbanes (D–MD) and Rep. Michael G. ...

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Sarbanes-Oxley, the legislation to prevent fraud.  Companies seem to have forgotten the purpose of this legislation.  It was to prevent the egregious acts done by Enron, Adelphia, Tyco and Worldcom that was the reason for it.  More importantly, it was to prevent the likes of Lay, Kozlowski, Rigas and Ebbers from making companies their own personal banks.  Instead, more and more Sarbox is being used to audit the front-line.

However, the problem is not the front-line.  The greatest frauds of our time have come from the leaders of public companies and bankers.  The finance game is the one to be watched.

This does not sit well in organizations.  Think about it, if you are in governance, audit or risk will your focus really be about executives?  I don’t think so.  These are the ones that pay your salary.  Makes more sense to aim lower and justify a non-value added existence.

Organizations go after easy targets the front-line.  Making it virtually impossible for those that create value to do their work.  Lots of wasted time analyzing systems access, and authorization levels for the front-line is easier than finding back-dating of options or CEOs and CFOs colluding to manipulate stock price.  Doing so would be political suicide.

If the purpose of organizations is to make products and provision services that improve customer’s lives.  It may be boring, but you don’t get into creative accounting or unnecessary interference with those that help customers get what they want.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for  Learn more about the 95 Method for service organizations.  Reach him on Twitter at LinkedIn at

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