Sarbanes-Oxley Act of 2002: Are Multi-National Corporations Unduly Burdened?


The Sarbanes-Oxley Act was enacted by Congress in response to the frauds perpetrated by several large U.S. companies; Enron and WorldCom were the main catalysts for the swift regulatory response. Though the primary impetus of Sarbanes-Oxley was to deter corruption domestically, its impact has had multinational reach. Problems arise when foreign corporations domiciled outside the United States are subject to both U.S. securities law and the laws of their home country, particularly when the laws are in conflict. This five part comment examines the effect that the Sarbanes–Oxley Act of 2002 has had on multinational corporations. The comment begins by providing the background of the Act noting the circumstances that brought about its enactment. Part two outlines the sections of the Act that have a direct regulatory impact on multinational corporations registered on a United States exchange and the necessary steps that the effected corporations have taken in order to manage the regulations imposed by the Act. Some sections of the Act regulate multinational corporations specifically, while other sections indirectly affect multinational corporations. Part three of the comment analyzes the interaction of Sarbanes-Oxley with international corporate governance rules and regulations, giving particular attention to the European Union, specifically France and Germany. It examines which regulations have been more successful and the reasons for that success. The comment finds the best place to view the success of Sarbanes-Oxley is the decision of a multinational corporation to cross-list on a United States exchange. The success of the Act can also be seen by looking at the effect Sarbanes-Oxley has had on other countries’ corporate governance regulations. In part four, the comment looks at the extraterritorial applicability of United States law and how it affects the enforcement of the regulations mandated by the Sarbanes-Oxley Act on multinational corporations. It examines the history of extraterritorial power of federal legislation on activities occurring outside the United States, but having an impact domestically. The comment concludes by looking at what the Sarbanes-Oxley Act will mean for the future of corporate activity both inside and outside of the United States. It also emphasizes that legislation alone will not be enough to deter corruption, but until all corporations can effectively police themselves, there will always be the taint of corruption looming on the horizon.


Business Organizations Law | Commercial Law | Economics | International Law | International Trade Law | Securities Law

Date of this Version

March 2006