Corporate Governance - Cost Benefit Analysis of Sarbanes Oxley

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THE BENEFITS OF SARBANES-OXLEY AND CORPORATE GOVERNANCE MEASURED AGAINST THE COSTS Salim Motala A research project submitted to the Gordon Institute of Business Science, University of Pretoria, in partial fulfilment of the requirements for the degree of Master of Business Administration. 14 November 2007 ABSTRACT The Sarbanes-Oxley Act of 2002 (SOX) is the only legislated corporate governance structure, and is aimed at increasing investor confidence in public companies by forcing them to be transparent in their financial affairs. In order for companies to comply with the legislation, significant costs need to be incurred without any guarantee that the benefits will accrue to the investors or the company. The legislation will…show more content…
CORPORATE GOVERNANCE................................................................. 7 2.1.1. Corporate Governance ...................................................................... 7 2.1.2. History of Corporate Governance ...................................................... 7 2.1.3. Corporate Governance Structures ..................................................... 8 2.1.4. Good Corporate Governance............................................................. 9 2.1.5. South Africa ....................................................................................... 9 2.2. THE ABSENCE OF GOOD CORPORATE GOVERNANCE................... 11 2.2.1. Management.................................................................................... 11 2.2.2. Enron ............................................................................................... 12 2.2.3. WorldCom........................................................................................ 13 2.2.4. Leisurenet........................................................................................ 14 2.2.5. Detection of Fraud ........................................................................... 14 2.3. SARBANES-OXLEY AS A RESULT ....................................................... 15 2.3.1. Introduction to SOX ......................................................................... 15 2.3.2. The Impact of

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