Document Type
Article
Publication Date
5-2-2003
Abstract
Cultural change is a stubborn thing. The womens suffrage movement began with in 1792 with the publication of Mary Wolstonecrafts book, Vindication of the Rights of Women, and did not achieve its political goal until the passage of the Nineteenth Amendment, 128 years later. The Civil Rights Movement traces its origins to the abolitionist movement of the mid 19th century, but while slavery was abolished by the Thirteenth Amendment in 1865, the principle of social equality did become law until nearly 100 years later, upon the enactment of the Civil Rights Act of 1964. As the continuing womens and civil rights movements demonstrate, these significant political goals were only threshold achievements; the struggle to diffuse the cultural values that these movements represent still continues. Social and economic crises tend to drive cultural change faster. There was no formal public policy supporting business competition until 1873, when the unchecked consolidation practices of the robber barons triggered an economic panic. The Sherman Anti-Trust Act of 1890, enacted 17 years later, was the first legislative expression of a new cultural value favoring competition. The Great Crash of 1929 proved to be even more compelling, stimulating a new cultural value favoring disclosure of financial records for publicly traded companies to protect the investing public. In five short years, that value found expression in the Securities and Exchange Act of 1934, which created the Securities and Exchange Commission. On December 6, 2001, the Enron Corporation filed what was then the largest bankruptcy proceeding in American history. By any standards it was a financial disaster of epic proportions for investors, employees, the industry, the region, and the country. But Enrons impact did not end there. As the companys corporate dysfunction and managerial excesses came to light, the business press observed that Enron was not an aberration in American corporate governance practice (Byrne, et al., May 6, 2002.) Enrons board was sophisticated and knowledgeable; its management team was experienced, skilled, and well trained. The key decision-makers did precisely what the marketplace motivated them to do, and they did it with precision and vigor. Far from being a corruption of American capitalism, in many respects Enron was its apotheosis. The implications of Enron as an indictment of capitalism in the wake of the terrorist attack of September 11, 2001 and as a potential catalyst for a repeat of the Great Crash of 1929 was not lost on the United States Congress. Lawmakers began a chain of events that resulted in the passage of the Sarbanes-Oxley Act of 2002, which went into effect on July 30, 2002. The Act called for sweeping changes of corporate governance for publicly traded companies. It also re-scripted the professional roles of key personnel serving those companies, including directors, managers, accountants, and attorneys. Within a breathtaking seven months, Congress articulated and gave legal expression to a proposed cultural change of astounding proportions. For investors in publicly traded companies, Congress effectively suspended the law of caveat emptor (let the buyer beware), a principle of free market economy already ancient when Adam Smith published The Wealth of Nations in 1776. With the stroke of a pen, responsibility for ensuring informed investment decisions was transferred from the buyers to the sellers. The agency charged with responsibility for disseminating and enforcing this value and the new model of corporate governance it required was the understaffed, underfunded, underpaid, overworked, and politically challenged Securities and Exchange Commission. This study explores the question of whether two critical communities as defined by Rochon (1998), the American Bar Association and the Securities and Exchange Commission, are successfully driving cultural change on the part of corporate lawyers, whose cooperation is critical to achieving the reforms in corporate governance sought by both. Both communities undertook formal and public action to achieve goals that transcended their usual spheres of influence while they were under the pressure of a perceived economic crisis. I have applied social movement theory to understand how these separate but interacting phenomena are impacting the cultural behavior of the legal community.
Keywords
Social change -- United States
Rights
© The Author(s). Kelvin Smith Library provides access for non-commercial, personal, or research use only. All other use, including but not limited to commercial or scholarly reproductions, redistribution, publication or transmission, whether by electronic means or otherwise, without prior written permission is strictly prohibited.
Department/Center
Design & Innovation
Recommended Citation
Schmid, Teresa, "Enron and Sarbanes-Oxley as Engines of Cultural Change In a Theory of Movement" (2003). Student Scholarship. 195.
https://commons.case.edu/studentworks/195