Neoliberalism, deregulation andSarbanes-Oxley

The legitimation of a failed corporategovernance model

Barbara D. Merino and Alan G. MayperUniversity of North Texas, Denton, Texas, USA, and

Thomas D. TollesonTexas Wesleyan University, Fort Worth, Texas, USA

Abstract

Purpose – The paper aims to use a neoliberal ideology to frame an analysis of how the power of ideascan be used to maintain a failed corporate governance model based on stockholder primacy.

Design/methodology/approach – The paper employs the concept of corporate hegemony toprovide an understanding of the conditioning environment in the USA in the 1990s. It examines thetactics that neoliberals used to gain consensus for their ideology and to skillfully deflect criticism inthe face of significant policy failures that have had a global impact.

Findings – The paper highlights the power of ideology to create a desired outcome. It finds thatSarbanes-Oxley represented a neoliberal victory in that it legitimated shareholder primacy andcontinued use of a failed corporate governance model.

Practical implications – Sarbanes-Oxley did not address the systemic problems associated withderegulation; it will not resolve the basic problem of how to prevent corporate malfeasance in aneconomic environment that rewards arbitrage capitalism, high risk and a focus on short-term profits.

Originality/value – If shareholder primacy weakens accountability, as the paper suggests, thenaccounting researchers need to develop models that focus on deregulation rather than on regulatorycapture and the use of state power to promote private interests. Accounting academics need to assumethe role of public intellectuals and to reject Milton Friedman’s focus on negative freedom as the soleobjective of economic activity and examine economic well being in terms of positive freedom.

Keywords Corporate governance, Shareholders, United States of America

Paper type Conceptual paper

IntroductionNeoliberalism has been called “the defining political economic paradigm of our lives; itrefers to the policies and processes by which a relative handful of private interests ispermitted to control as much as possible of social life” (McChesney, 1999, p. 1). Whilecouched in the language of classical liberalism, neoliberalism should be not viewed as asimple extension of either classical or neoclassical economic theories. It is much moredraconic. Classical liberal theorists stressed the need for competitive markets andposited a minimum role for government, but they recognized that markets were amoraland some government oversight was needed. Neoliberals extol one aspect of AdamSmith’s theory, i.e. free market competition, but, as George (1999) notes, they omit themoral aspects of Smith’s treatise. Michalitsch (2004, p. 4) concluded that Hayek and hisneoliberal followers limit the functions of the state “to preventing violence and deceit,

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0951-3574.htm

AAAJ23,6

774

Received October 2008Revised 27 July 200924 November 2009Accepted 10 February 2010

Accounting, Auditing &Accountability JournalVol. 23 No. 6, 2010pp. 774-792q Emerald Group Publishing Limited0951-3574DOI 10.1108/09513571011065871

protecting property, assuring observance of contracts and recognizing equal rights forall individuals to produce and sell in any quantity”.

Neoliberalism fosters corporate hegemony since it treats the market as anomnipotent God that should direct the fate of human beings. Critical theorists of allpersuasions, e.g. Gramsci (1971), Dugger (1989), Polanyi (1944), have long warned ofthe dangers of allowing economic interests to dictate societal norms. Polanyi (1944,p. 73) argued that “to allow the market mechanism to be sole director of the fate ofhuman beings and their natural environment would result in the demolition ofsociety”[1]. He erroneously predicted after the Second World War that the Keynesianrevolution had permanently ended the domination of society by the economic elite.

There are basic contradictions in the neoliberal message that unregulated marketswill lead to the greater social good. But, the failure of neoliberal policies and the relatedfrequent corporate crises have not had an impact on neoliberal rhetoric. The savings andloan crisis, the stock market crash of 1987, the corporate scandals of the 1990s and early2000s, abusive tax shelters, use of new financial instruments such as credit defaultswaps in high risk ventures, and excess leverage all served to create enormous pain forthe global economy. Tabb (2003, p. 25) concluded that neoliberalism “has succeeded asthe class project of capital. In this, its unannounced goal, it has increased the dominanceof transnational corporations, international financiers and sectors of local elites”.

This paper builds on the work of Soederberg (2008), Stein (2008) and Cooper (2005).Each of these studies considered the effect of neoliberal policies from a criticalperspective. Our study adds to these previous works by linking neoliberalism, agencytheory and the regulatory aspects of Sarbanes-Oxley (S-OX) to the shareholder valueconcept of corporate governance. One objective of our paper is to create a betterunderstanding of the tactics that neoliberals used to gain consensus for their ideologyand to skillfully deflect criticism of deregulatory policies that led to a US market-drivenglobal recession in 2008/2009. A second objective is to make accounting academicresearchers aware of the need for more realistic research frameworks to address theadequacy of the shareholder value corporate governance model in a global economy. Inshort, we are asking accounting academics to serve as public intellectuals, criticalcommentators who unmask neoliberal myths, examine the socioeconomic impact ofderegulatory policies and assess the effect of continued reliance on the traditionalcorporate governance model on the lives of ordinary people.

Outline of the studyThe paper is organized as follows. In the first section, we describe the relationshipbetween neoliberalism, corporate self-governance and global corporate hegemony. Inthe next section, we discuss how neoliberals used various types of power to promotetheir deregulatory agenda. In the following section, we appraise the role of profit inneoliberal ideology and the incentives this created for corporate malfeasance. In thenext section, we examine the neoliberal and media responses to the corporate scandalsin order to demonstrate that despite strong rhetoric, reforms centered on the traditionalshareholder value corporate governance model. In the penultimate section, we link theinfluence of neoliberal thought to the legislative and regulatory responses to thescandals and discuss how the Securities and Exchange Commission used itsphilosophy of corporate self-governance to apply the key provisions of S-OX to thecorporate environment. We concur with Soederberg (2008) that such an approach

Neoliberalism,deregulation and

S-OX

775

preserves the status quo, i.e. the traditional corporate governance model, leading us toquestion if S-OX will prevent future corporate malfeasance. In our conclusion, we callfor accounting researchers to assume the role of public intellectuals and to develop newconcepts to measure the effectiveness of corporate operations and to debunk theneoliberal notion that maximization of “pecuniary” profit will lead to maximization ofsocial welfare.

A return to the road to serfdomHayek (1944) traced the antecedents of neoliberalism in his book The Road to Serfdom.The seeds of Hayek’s neoliberal message found fertile ground in the USA at theUniversity of Chicago. Milton Friedman, considered the father of the Chicago School ofEconomics, became the leading advocate of Hayek’s philosophy in the USA. Friedman’s(1953, 1981) works advocated a laissez-faire approach by government to the marketplace.Ronald Reagan’s election in 1980 provided neoliberalism with a charismatic and effectivespokesman in the highest office in the USA. With the demise of communism, neoliberalswaged an effective media campaign to promote “free market” competition andderegulation as essential to the nation’s well being. Pointing to a similar phenomenon inthe UK, George (1999, p. 1) argued that “the central value of Thatcher’s doctrine and ofneoliberalism itself is the notion of competition – competition between nations, regions,firms and of course between individuals”.

Neoliberals envisioned a world made better by competition. They argued thatcompetitive forces:

. allocate all societal resources efficiently; and

. result in a morally superior form of political economy.

Therefore, they suggested the government could limit its role to preserving order,protecting individual freedoms and enforcing contracts. We view neoliberalism as aninstrumental discourse that mystifies, justifies, naturalizes and universalizesinequality and elite economic status. Giroux (2005) depicted neoliberalism aswedded to the belief that the “market should be the organizing principle for all political,social, and economic decisions, neoliberalism wages an incessant attack on democracy,public goods, and non-commodified values”. Everything is for sale; public lands areprivatized, airwaves are handed to corporate interests, the environment is polluted, allin the name of profit. We concur with Giroux’s (2005, p. 2) scathing indictment ofneoliberalism as a “virulent and brutal form of market capitalism”.

Neoliberalism can be viewed as a return to a primitive form of individualism. It isreflective of the Social Darwinists’ message, popular at the end of the nineteenth century.Social Darwinists viewed Nature as exercising an “invisible hand” that ensured thesurvival of the fittest. Neoliberals repackaged that message and sold EconomicDarwinism, survival of the wealthiest, as “natural” at the end of the twentieth century[2].Klein (2007, p. 56) denounced Milton Friedman for arguing that government “mustremove all rules and regulations standing in the way of the accumulation of profits”.

Accounting agency or positive theorists accept Economic Darwinism in that theydepict the free market as inviolable and a mechanism that promotes both economic andsocial well being. Positive Accounting Theory mirrors the Chicago School ofeconomics. Contracting enables shareholders to regain power and become the pivotalfactor to ensure the traditional corporate self-governance model works (Watts and

AAAJ23,6

776

Zimmerman, 1979; Reiter, 1998). The theory absolves government from responsibilityfor ensuring equity among the populace; in fact, to do so would harm society[3].Neoliberal strategists disseminated this message far and wide, and they succeeded increating a hegemonic environment that rendered inequalities invisible and socialwelfare questions moot. We define hegemony as a state of being where all sectors ofsociety appear to be in harmony with those in power and control. It involves a way ofseeing things and convincing people that this particular way of seeing is “natural” andright. Corporate hegemony results when economic interests become the dominantinterests in a society, and all other independent institutions become means by which topromote economic interests (Dugger, 1989).

The Italian Marxist philosopher, Antonio Gramsci (1971), described hegemony asthe organization of different social forces under the political, intellectual and moralleadership of a particular social force and its intellectuals. He used the term hegemonyto reflect manufactured consent which resulted from control of cultural outlets and ledto voluntary subjugation of the non elite classes[4]. Gramsci understood the importanceof ideas in enabling power. Ironically, neoliberals seem to be the only group thatheeded Gramsci’s message that ideas matter. Susan George (1999) succinctly outlinedthe strategy that neoliberals have used:

If you can occupy peoples’ heads, their hearts and their hands will follow . . . the ideologicaland promotional work of the right has been absolutely brilliant. They have spent hundreds ofmillions of dollars, but the result has been worth every penny to them because they havemade neo-liberalism seem as if it were the natural and normal condition of humankind. Nomatter how many disasters of all kinds the neo-liberal system has visibly created, no matterwhat financial crises it may engender, no matter how many losers and outcasts it may create,it is still made to seem inevitable, like an act of God, the only possible economic and socialorder available to us (George, 1999, p. 3).

Neoliberals have sponsored a cadre of Gramsci’s “organic intellectuals” who havepromoted an ideology that paved the way for the economic elites to exercise power, almostinvisibly. Subjugation has been voluntary. The key to the corporate governance debate is,and always has been, power. Berle and Means (1932) argued that managers had becomethe princes of industry and no effective means existed to control them. The neoliberalresponse has been to reposition the shareholder at center stage. Shareholder primacy hasbecome the mantra that makes the perception of corporate self-governance work. Powerasymmetries between shareholders and managers become moot since neoliberals assumethat contracting will solve agency problems (Jensen and Meckling, 1976; Reberioux, 2007).They also assume that the relationship between managers and principals occurs on an“even playing field” and that the “state is neutral and separate from the economy”(Soederberg, 2008). That is not to say that neoliberals were unaware that powerasymmetries exist. They used various forms of power to gain voluntary acceptance offinancial deregulation and corporate hegemony not only in the USA, but also globally.

Concepts of powerThe concept of power has been difficult to operationalize but there has been consensus

that there are three types of power – coercion, agenda setting, and manufactured consent– with the latter form being the most effective form of power. The corporate elite haveexercised all three types of power since the 1980s, creating an amoral (if not immoral)environment that facilitated financial reporting abuses and resulted in a spate of scandals.

Neoliberalism,deregulation and

S-OX

777

Coercive powerDahl (1957) defined coercive power as the ability of one individual to coerce anotherinto doing something they would not otherwise do. Coercion is the most blatant form ofpower but, generally, exercise of coercive power is transparent and can invoke publiccriticism. Corporations exercise coercive power whenever they legitimately threaten tomove when a locality demands some form of social benefits, such as higher wages.Public visibility renders coercive power less appealing than agenda setting ormanufactured consent, and neoliberals prefer to use these less visible means to achievetheir goals.

Agenda settingMills (1956) outlined how power elites exercise a more effective and less transparentform of power through agenda setting. Agenda setters determine which issues will bediscussed and also determine what items to keep off the agenda. Neoliberal strategistsmade agenda setting an art form. Political campaign contributions, lobbying andcontrol of the media affected the public policy agenda. Blyth (2002) pointed out onereason that neoliberalism became the dominant ideology in the USA in the last quarterof the twentieth century was because the “business class” united and used money topromote neoliberal policies. Money talked.

While a complete analysis of the effect that the corporate sector had on bringingderegulatory legislation to the top of the political agenda in the USA is beyond thescope of this paper, we do examine the effect of deregulation on three importantgroups, accountants, financial analysts, and the media, all of whom theoretically serveas watchdogs to protect investors and the public interest. Accountants actively lobbiedCongress to reduce their legal liability; the profession donated $7.7 million dollars tomembers of Congress in the 1994 election cycle. Congress listened to the profession’smessage, passing the Private Securities Litigation Reform Act (PSLRA) (1995)[5].Passage of the PSLRA made it less risky for one group of gatekeepers, auditors, toallow management greater latitude in selecting financial reporting methods as itlimited auditors’ legal liability.

The financial services industry also made enormous political contributions tomembers of both parties of Congress in an effort to formally repeal the Glass SteagallAct, formally known as the Banking Act (US Congress, 1933). After the crash of 1929,Glass Steagall was passed to separate retail and investment banking in order to curbfinancial speculation and protect retail investors. Beginning in the 1980s, Citigroupspearheaded a long and successful lobbying effort to slowly erode the provisions ofGlass Steagall. By the 1990s, retail banks could earn 25 percent of their revenue frombrokerage activities. The passage of the Financial Services Modernization Act (USCongress, 1999), better known as the Gramm, Leach, Bliley Act (GLBA), repealed GlassSteagall and reunited investment and retail banking.

The GLBA allowed another group of gatekeepers, financial analysts, to benefit fromthe investment banking activities of their firms. Bonuses were based on all earnings,and investment banking had a much higher return than retail banking. Analysts hadlittle incentive to issue earnings warnings to retail investors if their bonuses wereabout to benefit from an Initial Public Offering (IPO). Gutting regulation allowedcorporations to bend, if not break, the law and the public’s watchdogs to aid and abetfraud through indifference to their fiduciary responsibilities. The cynical might say

AAAJ23,6

778

that corporate generosity paved the way for massive deregulation and that the repealof New Deal safeguards created a climate conducive to scandals.

Finally, as is often the case with deregulation, unbridled competition soon led to anoligopolistic media industry. Five corporations, Bertelsmann, Disney, News Corporation,Time Warne and Viacom, effectively controlled the US media. The corporate controlledmedia rarely mentioned corporate influence on political agenda setting and carried thestandard neoliberal message. Bagdikian (2004, p. 14) examined media messagesconcluding that “political slogans advocating a shrinking government and argumentsinvolving that idea filled the reportorial and commentary agendas of most . . . majornews outlets”. The mass media also sought to control costs by limiting investigativereporting and focusing on feature and consumer stories (Greenwald and Bernt, 2000).Events such as the financial industry lobbying efforts to relax Glass Steagall beginningin 1987 went virtually unreported in the press or among academic accountants[6]. Whileneoliberal discourse extolled shareholder primacy, the neoliberal political agenda servedto undermine the fiduciary responsibilities of professional gatekeepers and limit presscoverage of the effects of proposed legislation on consumers, stockholders and citizens.The media’s bashing of government provided framing for the neoliberal message thatfacilitated voluntary acceptance (manufactured consent) of that message.

Manufactured consent – the power of ideasThe third form of power, manufactured consent is the most effective means of exercisingpower. Gramsci (1971) noted that establishment of both intellectual and moral hegemonyis a condition of voluntary conquest. More recently, Lukes (1994, p. 23) clarified thatmessage, asking “Is it not the supreme exercise of power to get another or others to havedesires that you want them to have – that is to secure their compliance by controllingtheir thoughts and desires?” Voluntary subjugation will not generate resistance, sincefalse consciousness renders the iron chains that grip the public mind invisible[7].Neoliberals effectively used the rhetorical technique called framing to gain manufacturedconsent (Lakoff, 2003). One of the most compelling examples of framing is to depictregressive tax policy as “tax relief”. Relief implies an affliction and a hero (the neoliberal)to remedy the affliction; thus, although neoliberal tax policies clearly privilege higherincome groups, the public accepts this because “tax relief” is seen as just.

Michalitsch (2004) provided a similar observation about the power of neoliberalism.She argued that neoliberalism influences the cognitive, emotional and socialdimensions of individuals. At the cognitive level, neoliberalism results instandardized thinking. The language of neoliberalism fades out real contradictionsand social conflicts. The goal of neoliberal discourse is to achieve voluntarysubordination under dominant conditions, which results in individuals thinking thereis no alternative. Competition becomes legitimated and the “naturalness” and“unchangeableness” of social conditions produce socially incompetent individuals. Theglobal standardization of the social dimension manifests itself as the standardization ofthinking (Michalitsch, 2004).

An important ideological justification of deregulation is that it would deliver wealthand security, globally, if market forces were freed from regulatory intervention. Court(2003) demonstrated how corporations have shaped public opinion by arguing thatregulation increases consumer costs and destroys business. He noted that corporationshave been so successful with these arguments that the public has accepted

Neoliberalism,deregulation and

S-OX

779

deregulation as a natural process. The Washington Consensus, composed of threeinstitutions, the World Bank, the International Monetary Fund, and the US Treasury,instituted lending policies that rewarded developing nations that made structuralchanges and penalized those that did not. They carried the neoliberal message thatpromoting the special interests of the economic elite was in the general interest of asociety. Citizens are creatures of the economy and politicians are “stewards of theeconomy” whose “overarching political mission is to insure that more and more goodsand services are available to be consumed” (Staats, 2004, p. 591). Neoliberalism framesfree markets as natural not self-constructed; markets fire people, markets crash andhuman efforts to control markets are doomed to failure (Dugger, 1989; Cooper, 2005).

The role of profit in neoliberal ideologyNeoliberals not only extol individual freedom, but they also suggest that freedom,individual liberty and well-being cannot be achieved if there is an interference withmarket forces. Friedman (1981) stresses one form of freedom, the freedom of anindividual to carry out activities without interference or coercion, a negative form offreedom. Positive accounting researchers, borrowing from Friedman, depict economicfreedom as a subset of equality of rights in that it is the right to enter into voluntarycontracts. This freedom is the dominant form of freedom in accounting empiricalresearch. This effectively disregards an equally important freedom, equality ofopportunity, a positive form of freedom (Rawls, 1971). Positive freedom requiressubsidies. There is a tradeoff between negative and positive freedom. Taxes curb someindividuals’ activities, but if those taxes provide a subsidy for education, they createfreedom for others by offering more opportunities from which to choose. We rarely seediscussion of positive freedom in the academic archival literature, but it is critical toany democracy. This same research stream also fails to examine whether voluntarycontracting is a relevant model if we have structure coercion created by unregulatedmarkets (Rothschild, 2003).

Neoliberals have powerful think tanks that promote the neoliberal message becausethey understand the importance of “training” willing subjects. Aune (2001, pp. 40-1)examines how neoliberal rhetoric promotes “economic correctness” in order to producecompliant subjects. He points out that neoliberals adopt a realist perspective; thisallows them to separate power from its textuality and to “craft an aesthetically unifiedworld of sheer power and constant calculation”[8]. Accounting (pecuniary) profit playsan important role in legitimating the neoliberal message. The “free” market metaphoris deeply engrained in Anglo American culture; an autonomous market, constrainedonly by competition (the invisible hand), ensures that self-interested profit seekingmaximizes social well being. There is no ambiguity about accounting profit; it is theend, not a means to an end. Capitalism Magazine, one of the many outlets for aconservative “think tank,” echoes this message loud and clear:

In an unfettered free market the desire for profit is satisfied by honest, long range, rationalbehavior: by innovating, by hiring the best people, by selling quality products and byproviding accurate information to the owners of the corporation – shareholders. As forshort-range managers the market will not tolerate them (Brook and Epstein, 2002, p. 2).

Profits at all (or perhaps any) cost became the mantra of the 1990s (Chomsky, 1999;Stiglitz, 2003).

AAAJ23,6

780

During the halcyon days of the 1990s, increasing accounting profits and/or revenuesreinforced the neoliberal message that everyone could be rich. Arthur Levitt (1998),SEC chairman, warned about managed earnings, but his concerns drew limitedattention from the popular press and threats from Congress to cease and desist[9].Whether through pension plans or direct investment, the neoliberal message was thatthe USA had become an “ownership” society in which all, except the clearlyundeserving who could not compete, would prosper.

Despite neoliberal arguments that the market will not tolerate amoral behaviorwhen greed is extolled as a virtue and accounting profit is reified, moral lapses can beexpected to occur. Neoliberals argue that Enron, WorldCom, and Health South wereexceptions; given time, the market would have self-corrected. Vidal (2002, p. 2)suggests that when profit becomes the focal point “then everything else, from productquality to the workforce, becomes cost to be controlled and reduced. Profits overpeople, profits over environment, profits over community, (fake) profits, even, overshareholders.” He concludes that “only a fool would believe that a lecture in ethicswould trump the incentives of profit over everything else” (Vidal, 2002, p. 2).Deregulation, promoted by neoliberal ideology, created an environment that fosteredcorporate malfeasance and earnings management.

Corporate malfeasance – the deregulatory environmentThe Conference Board’s 2003 Commission on Public Trust and Private Enterpriseindicates a perfect confluence of events led to the abuse of the public trust bycorporations[10]. These events include the excessive compensation of top management,inappropriate corporate governance mechanisms, and the inadequacy of accountingcontrols and audits (Conference Board, 2003). We agree that these events providedsome impetus for the malfeasance; however, we concur with Coffee’s (2003) conclusionthat deregulation led to fiduciary neglect from traditional gatekeepers, i.e. externalauditors and financial analysts. Deregulation led not only to individual misconduct butalso to systemic corporate governance problems. Neoliberal rhetoric stressedstockholder value, but incentives, such as stock options, designed to alignmanagerial and investor interests, failed. The Conference Board documented thedramatic increase in the use of stock options in the 1990s which created incentives formaximize short-term earnings to increase share prices.

Contemporaneously, the Government Accountability Office (GAO – at the timereferred to as the general accounting office) provided the US Senate’s Committee onBanking, Housing and Urban Affairs with a report on financial restatements (GAO,2002). The report documented (through estimation) the number of restatements, due toaccounting irregularities, from January 1997 to July 2002. Restatements are associatedwith a drop in investor confidence in the market place. The report states thatrestatements increased considerably over time; large corporate restatements increasedat a greater rate than that of small listed companies (GAO, 2002). The restatementsclearly had a negative impact on market valuation where hundreds of billion dollarswere lost. In the five-and-a-half-year analysis, the GAO estimates that “one in tencorporations restated their financial statements due to accounting irregularities” (GAO,2002, p. 16).

Executive compensation, in the form of stock options, was an enormous incentivefor misbehavior (Coffee, 2003); top managers re-focused the problems onto lower level

Neoliberalism,deregulation and

S-OX

781

managers, primarily non-US middle managers; tone at the top or ethics reform was notconsidered; auditors, in some of the cases may have been misled, but in other casesthey appeared to be asleep at the switch. Jensen and Meckling (1976) promoted stockoptions as a means of reconciling shareholder and managerial interests and increasingshareholder value. Archival research, based on agency theory, proliferated throughoutthe last quarter of the twentieth century and has spread globally. However, at the turnof this century, critics, including Jensen (2001, p. 3), concluded that “typical executivestock options are not structured properly and, as a result, reward managers for takingactions that destroy value”. Stock options provided a means of redistribution ofcorporate wealth to managers, and the costs were borne by all other societal groups,labor, consumers, taxpayers and shareholders.

Ball (2009) disagrees with the above assessment. He argues that stock options,conflict of interests of fiduciaries or financial deregulation were not major contributorsto the corporate scandals. He concludes markets worked “surprisingly well in detectingbut not preventing the problem” and does not recommend change (Ball, 2009, p. 323).We strongly disagree with Ball that it is sufficient to employ a market system thatdetects but does not prevent corporate malfeasance. Ball’s position supports Cooper’s(2005) argument that the US environment has become hostile to public intellectualswho challenge the status quo.

The neoliberal responses to corporate scandalsConrad (2004) examined neoliberal rhetorical responses to the corporate scandals andfound that the reaction occurred in two stages. The first stage involved symbolicplacation of an outraged public. Once it became clear the scandal could not be denied,both politicians and business leaders joined the public in expressing their outrage andheld public hearings. During those public hearings, neoliberals began to developrhetorical strategies to limit damage. One of the first moves was to label each scandal acrisis. The crisis label has a therapeutic effect, it calms emotions, but more importantlyit delays the need for policy reforms.

The second rhetorical stage seeks to narrow the definition of victims and to narrowthe problem from one of governance to a more tractable issue, such as accounting. Theneoliberal response first sought to narrow victims to ownership interests, i.e. outsideinvestors or employee investors, and to individualize moral lapses that occurred(Conrad, 2004). The employee as employee disappears from the scene and attention isdiverted from any systemic failure.

Once the moral lapses had been individualized, then the “few bad apples”explanation becomes predominant (Conrad, 2004, p. 316). It should be noted that theresponse in the academic community, the rediscovery of the need to teach ethics,perpetuates the bad apple syndrome. If the crisis stems from individual bad behaviorrather than from corrupt incentives or a corrupt system, then criminal sanctions orwhistle blowing protection provide viable solutions.

Similarly, defining the problem of corporate misbehavior as an “accounting crisis”rather than a crisis of corporate governance also suits the neoliberal agenda very well.It, too, diverts attention from corporate governance and systemic failures and switchesthe debate to arcane auditing and accounting issues. Cornehls (2004) documents thetrend in the press to individualize blame for the current scandals, placing the blame ona handful of rogues, executives, board of directors, audit firms, financial analysts, etc.

AAAJ23,6

782

Historically, accounting issues have not generated public fervor as such issues appearto be “mere” technical problems to be solved by the experts[11].

The media responseWilliams (2003) investigated media reports associated with the corporate scandals andfound those accounts contained two basic discourses: the discourse of attribution andthe discourse of recovery. Attribution discourses followed immediately upon publicdisclosure of scandals. They focused on a broad range of issues, including:

. executive wrongdoing and the manipulation of financial accounts;

. audit failures and conflicts-of-interest in the accounting profession;

. ineffective corporate governance;

. deceptive stock recommendations and conflicts-of-interest in the investmentbanking industry;

. deregulation of energy, technology, and telecommunications markets; and

. regulatory failure and political influence peddling (Williams, 2003, p. 6).

The subsequent discourses, which Williams (2003) labeled discovery discourses,focused on “remedies” for the crisis and at this stage the deregulation issue andpolitical influence peddling virtually disappeared from the media accounts. Theremedies focused on criminal penalties for individual wrongdoers, reforms ofaccounting standards and oversight, elimination of conflicts of interests forindividuals, i.e. separating auditing and consulting and divorcing analysts’compensation from investment banking activities. Thus, neoliberals effectively usedpolitical and media control to reframe the corporate scandals as a matter of a “few badapples” and conflict of interest problems for the “gatekeepers” of the public trust.

Schiller (1992) attributed the acceptance of corporate domination of the media to amarriage of economics and a corporate controlled economic media. He mentions fourforms of mind manipulation (myths) that neoliberals successfully used to gain theunforced consent of the populace. The neoliberal myths were:

(1) individualism and personal choice;

(2) the neutrality of other key social institutions;

(3) of unchanging human behavior as economically rational; and

(4) education.

It is not surprising that neoliberals’ efforts to diffuse the public outrage centered reformon the traditional self-regulatory-model based on shareholder primacy. Their effortsresulted in one significant “remedy,” the Sarbanes-Oxley Act (US Congress, 2002) (S-OX).

S-OX: neoliberals preserve the status quoWhen President George W. Bush (2002, p. 1) signed the Sarbanes-Oxley Act on July 30,2002, he characterized S-OX as “the most far reaching reform of American businesspractices since the time of Franklin Delano Roosevelt”. Ironically, Bush, in an eradominated by neoliberalism, referred to the New Deal, which neoliberal criticsassociate with big government and market regulations. His words may be interpretedas a rhetorical device aimed at appeasing shareholders (Soederberg, 2008).

Neoliberalism,deregulation and

S-OX

783

Congressional leaders believed, or at least publicly professed to believe[12], that S-OXwould improve corporate governance and strengthen corporate accountability to theextent that investors will not see future corporate frauds such as Enron and WorldCom(Peters, 2004). The CEO of NASDAQ noted that S-OX was a necessary but toughprerequisite to the restoration of investor confidence through increased transparency,strict accountability and improved corporate governance (Greifeld, 2006). To the extentthat corporate governance practices were strengthened, contracting (agency theory)proponents viewed S-OX as realigning the interests of agents and principals (Ribstein,2002). But as Reberioux (2007) noted S-OX reaffirmed shareholder primacy, which hebelieves led to the weak corporate monitoring systems that produced financialscandals such as Enron and WorldCom.

The politically charged debate over faulty corporate governance practices andshareholder primacy allowed neoliberals to use S-OX to convince the public that theegregious scandals of the day were due to the greed of corporate executives, the lack oftransparency and the absence of accountability rather than the fault of deregulation.Soederberg (2008) posited that by focusing on symptoms such as executive compensation,murky disclosure and little or no accountability, neoliberals framed the debate in terms ofhow companies should control their internal processes and the failure of accountants,auditors and other gatekeepers to protect shareholder interests[13]. This position parallelsConrad’s (2004) previously mentioned rhetorical device of drawing attention toparticulars, like internal controls, rather than systemic corporate governance reform.

Because of its length and complexity, a thorough discussion of S-OX is beyond thescope of this paper. Some of its key provisions, however, are pertinent to a discussion ofhow neoliberal ideology was preserved in the crafting of S-OX. In Section 101 of S-OX,legislative architects created the Public Company Accounting Oversight Board (PCAOB)and gave it broad powers, such as authority to set auditing standards (Section 103) andto inspect the audits of public accounting firms (Section 104). These same legislatorsgranted the Securities and Exchange Commission (SEC) authority over the PCAOB(Section 107). S-OX, Section 404, focused on internal control processes as the primarymeans for ensuring the validity of a firm’s financial statements (SOX-online, 2009). SECoversight of S-OX and the emphasis on internal processes provided neoliberals with themechanisms to recreate the status quo rather than allow a restructuring of neoliberalcapitalism. Neoliberals continue to challenge the constitutionality of the PCAOB. In Mayof 2009, the Supreme Court agreed to place the case on its docket.

From its creation in the Securities Exchange Act (US Congress, 1934), the SEC hasoperated as a quasi-government agency charged with the oversight of informationabout and sale of securities offered to the public. Soederberg (2008) noted that technicalexperts administer the SEC and that society views the agency as a quasi regulatorybody that is characterized by objectivity, impartiality and neutrality in its efforts toprotect investors and police corporate management. Such a viewpoint serves animportant role in the SEC’s attempt to maintain the status quo, i.e. the currentcorporate governance model, while it carries out congressional mandates. Through theyears, the regulatory philosophy of the SEC has basically been one of corporateaccountability via self-regulation. The SEC’s response to prior federal legislationprovides evidence of the SEC’s deference to corporate self-policing.

In 1970 Congress, reacting to a market crisis, passed the Securities InvestorProtection Act (US Congress, 1970). The Act created the Securities Investor Protection

AAAJ23,6

784

Corporation and gave the SEC more powers to regulate brokers and their firms. InOctober, 1996, Congress enacted the National Securities Market Improvement Act (USCongress, 1996), which redistributed regulatory authority between federal and statesecurities regulators. The objective of each of these new laws was to give the SECsupplemental powers to investigate questionable securities transactions and to controlcorporate actors. With each new law, however, the SEC continued its reactive stance tocorporate malfeasance and its philosophy of corporate self-governance (Weismann,2004). The SEC’s reactive stance is nothing new. Longstreth (1983), a former SECcommissioner, noted that the SEC has repeatedly abdicated its role as a reformer andhas chosen corporate self-regulation with regulatory oversight. This creates a gapbetween the statutory powers that Congress has given the SEC through the years andthe SEC’s reluctance to bring about systemic reform. Thus, the SEC has consistentlychosen self-governance as its regulatory modus operandi.

SEC’s use of self-regulation through S-OXOn the surface, S-OX provides the SEC with additional tools to its arsenal to combatcorporate fraud and wrongdoing. For example, auditors are prohibited fromperforming most non-audit work for their audit clients (Section 201), andengagement audit partners must rotate off an audit every five years (Section 203).These requirements, along with other S-OX provisions, may give the investing public afalse sense of security, an illusion that S-OX healed what ailed corporate governanceand the external audit. On a deeper level, however, the SEC is using a self-regulatoryapproach in its oversight of S-OX. Such an approach allows S-OX to preserve ratherthan to challenge the underlying neoliberal philosophy now embedded in the generalcorporate governance framework.

Instead of developing mechanisms for establishing the oversight of internalprocesses of publicly traded firms, the SEC has continued its corporate self-governanceapproach by allowing companies to self-police themselves (Previts and Merino, 1998).To achieve its goal of continued self-regulation post-S-OX, the SEC has requiredmanagement and boards of directors to be more proactive in overseeing andmonitoring financial reporting, particularly internal control processes (Tracey andFiorelli, 2004). This approach of self-policing improves disclosure but, with nocorresponding internal scrutiny by the SEC, fails to provide an accurate measure ofcorporate risks (Weismann, 2004).

Although S-OX appears to reduce the conflict between agents and principals byrequiring greater accountability on the part of agents, it never attempts to reverse theunderlying dependency of self-regulated corporations on deregulated financial markets(Soederberg, 2008). Thus, S-OX recreates the dependency conditions that resulted infictitious shareholder value for the investors negatively impacted by corporatescandals such as Enron, WorldCom and Tyco International. In addition, S-OXinadequately addresses the divergence of shareholder interests and managementcontrol identified by Berle and Means (1932). The power and information asymmetriesthat existed between shareholders and managers before S-OX still exist after thepassage of S-OX. These shortcomings lead us to agree with Stein (2008) that S-OX wasmore about government rationalization of existing neoliberal thought and practicesencompassed in the state and less about protecting investors. We posit that S-OX waslargely symbolic and that its discourse fails to question the validity of the fallacious,

Neoliberalism,deregulation and

S-OX

785

but prevailing, viewpoint that a corporation is a nexus of contracts, best regulated byfree market forces as defined by neoliberalism. The SEC’s laissez-faire approach to itsregulatory oversight and application of key S-OX provisions to the corporate worldcauses us to question whether S-OX will deter self-interested behavior, earningsmanagement and fraudulent financial reporting in the future.

Because S-OX was constructed to fit the prevailing neoliberal corporate governanceframework, it neglects to examine the broader forces of neoliberalism – deregulation,the promotion of free markets as being “moral” forces reflecting societal resourceallocations and the greed fed by stock market-related incentives. The ineffectiveness ofS-OX can be seen in stock options backdating abuses that followed the passage ofS-OX: Tenet Healthcare – 2003, American International Group – 2005, Take-Two –2009, and Quest Software – 2009, just to name a few. S-OX was also unsuccessful inaddressing the boarder forces of neoliberalism that contributed to the subprimemortgage crisis. While upper-level management of companies such as Citigroup,Lehman Brothers, New Century and Washington Mutual made millions in bonuses andstock options, S-OX did not provide other stakeholders, including regulators, with thetransparency to see the risks associated with collateralized debt obligations (CDOs) ormortgage-backed securities (MBS) and the resulting exigencies of such speculation.This has been a spectacular failure of the policies of the Washington Consensus, notonly impacting the USA but also contributing to a world-wide recession.

ConclusionDespite the passage of S-OX, neoliberals continue to promote shareholder primacybased on traditional corporate governance measures (self-regulation) and financialderegulation. We have tried to highlight how the standard explanations for the recentcorporate failures mask the underlying systemic problems that exist in deregulatedmarket economies. Neoliberals skillfully used rhetoric to frame issues defusingcriticism; they understand the importance of support from a cadre of Gramsci’s (1971,p. 330) “organic intellectuals”. They have think tanks and a media infrastructure thatpropagate the free market “faith”. They also have an impact on higher education,through endowed chairs and centers. The corporate scandals have shown that merefacts will not break the hold that neoliberalism has had globally and, particularly, onthe American mind; it will take a concerted effort by critics to reframe the issues in amanner that highlights the growing contradictions between neoliberal theory andsocietal well-being. Corporate managers (the economic elite) exacted a premium fromall other stakeholders by manipulating earnings. This not only allowed them to receiveexcessive compensation, but also resulted in the loss of jobs to thousands of workersand huge losses to investors.

We argue that Sarbanes-Oxley preserved the status quo; it reflects an effort tomaintain shareholder primacy in the face of ever-growing evidence that the traditionalmodel, corporate self-regulation and financial deregulation, has been detrimental froma societal perspective. Neoliberals successfully diverted attention from the systemicfailures of deregulated markets. Despite neoliberal assertions that the omnipotent “freemarket” would not permit managers to adopt a short-term perspective nor to issue“false financial reports”, financial reporting abuses continue. Reberioux’s (2007, p. 508)claim that “shareholder primacy as a corporate governance mode is the main drivingforce behind the crisis” and that “shareholder primacy weakens, rather than

AAAJ23,6

786

strengthens managerial accountability” deserves further examination. Models thatreflect actual corporate relationships need to be developed. We posit thatSarbanes-Oxley served only to legitimate the traditional shareholder value corporategovernance model. S-OX masked the inadequacies of the current model by focusing ontechnical solutions, such as transparency and internal processes, in a last effort toresurrect a failed governance system.

Accounting academics could have an important role in reshaping public opinion.Berle and Means (1932) warnings about the effect of separation and control need to bereasserted. The message should be clear – contracting (agency theory) does not workin a global economy. We strongly disagree with Ball (2009) and other positiveaccounting theorists who suggest that it is sufficient to employ a market system thatdetects but does not prevent corporate malfeasance. We need new models thataccurately reflect the power asymmetries between managers, owners, and the public.Rather than developing models that focus on regulatory capture and the use of statepower to promote private interest, academic researchers need to develop models thatfocus on deregulation. This implies that archival researchers must rethink thedominant paradigm, shareholder value and agency theory that has been used toexamine issues of corporate governance. We need a new research framework thatrequires researchers to examine government inaction rather than government action.More importantly, we need accounting academics to reject Milton Friedman’s focus onnegative freedom as the sole objective of economic activity and examine economic wellbeing in terms of positive freedom. Equality of opportunity should be at least asimportant as an individual’s right to pursue activities without interferences.Government needs to be more, not less, active in controlling the economic elites thathave dominated the global economy for over a quarter of a century. All accountingacademics should be cognizant of the limitations of our current theoretical frameworksto raise and address significant accounting issues. Empirical researchers need toquestion whether or not a model, designed to explain the impact of accounting, can bebased on models that do not reasonably reflect actual economic relationships.

In a world of arbitrage capitalism that leads to extensive use of credit derivatives toenhance short-term profit maximization, funded primarily by workers’ pension funds,a deregulated economic system creates undue economic risk. We need to develop newconcepts to measure the effectiveness of corporate operations and to debunk theneoliberal notion that maximization of “pecuniary” profit will lead to maximization ofsocial welfare. Neoliberals successfully narrowed the impact of the scandals bylimiting the losses to “investors” (either owner or employee); the thousands ofemployees who lost their jobs have only been mentioned tangentially in the debate.Critical accounting researchers need to strive to make those employees visible again.We need to expand the concept of corporate performance measurement to reflect “fullearnings” not just profit to the owners and to recognize that the shareholder primacyand the traditional corporate governance model will not work in a complex globaleconomy. We also should begin to exam the impact of accounting on positive freedomand begin to examine measures that will increase the opportunity for individuals tosucceed. Finally, we concur with Cooper (2005) who concludes that the harrowingeffects of neoliberalism on the daily lives of people require that we have moreacademics who serve as public intellectuals. We need more critical commentaries onthe impact of accounting on socioeconomic well being.

Neoliberalism,deregulation and

S-OX

787

Notes

1. In a very interesting book, Pollin (2003) outlines three fallacies associated with neoliberalism,the Marxian (wage), the Keynesian (speculation) and the Polayni (social) problems. Heargues that neoliberalism exacerbates inequalities of individuals and nations.

2. Social Darwinism became far more popular in the USA than in the UK where Spencer lived;Andrew Carnegie (1901) carried the message forward in his Gospel of Wealth, which waspublished in book form in 1962. William Graham Sumner (1963) was its most eloquentacademic proponent.

3. See Goldstein (2002), who quotes Alan Greenspan (1963), who argued the free market systemis a “superlatively moral system that the welfare statists propose to improve upon by meansof preemptive law, snooping bureaucrats and the chronic goad of fear”.

4. Gramsci (1971) and Gramsci and Smith (1985) examined nineteenth century hegemoniccultural forms, such as newspapers, novels, and theater; Gramsci noted that to be effectivethese cultural forms required both widespread literacy and technological advance. Hesuggested these bourgeois cultural forms, functioned to exert control over the workingclasses by making their interest appear to be tied into the interests of the dominant classes.

5. See OpenSecrets.Org, the web site of the Center for Responsive Politics (2009) thatdocuments all political contributions in the United States by source. Accountants’contributions were evenly split between Democrats (51 percent) and Republicans (49percent). With this dollar amount, the accounting industry ranked 22nd out of 80 industriesin campaign contributions. (Center for Responsive Politics, 2009). See also, Huffington (2003)who documents the auditing profession’s use of money and media “to grease the way” forpassing favorable legislation and for lobbying Congress to block SEC action.

6. Schlesinger (2002) provides an excellent overview of the financial services industry’s effortsto repeal Glass Steagall beginning in 1987. GLBA, which allowed for full integration ofunderwriting, securities and insurance activities, went into effect on March 11, 2000.

7. See original institutional economists (OIE) like Dugger (1989), who regard emulation as acentral attribute of corporate hegemony. Foucault (1980) recognized that a dominantdiscourse often leads to voluntary subjugation of the disciplined.

8. The commodification of all aspects of life, subject to cost benefit calculation, finds anextreme application in the work of Gary Becker’s work. Becker (1986) defines marriage as atwo-person firm for the production of children.

9. See Schlesinger (2002) and Frontline (2005) for discussion of Congressional and corporatethreats to limit the SEC efforts; see Barr and Lambert (1998) for the profession’s earlierreaction to Levitt’s proposals.

10. The conference board is an independent not-for-profit organization advocating in the publicinterest from a large corporation point of view.

11. Previts and Merino (1998) discuss the public’s reaction to “accounting” crises in the USA inthe twentieth century.

12. In terms of neoliberalism rhetoric, the political leaders of both parties enthusiasticallyendorsed S-OX as a regulatory instrument capable of restoring the vibrancy of free markets.On July 15, 2002, the US House of Representatives passed HR 3763 [107th] ConferenceReport, i.e. the Sarbanes-Oxley Act, by a roll call vote of 334-90. Ten members of the Housewere not present to vote. Ten days later on July 25, 2002, the US Senate vote on HR 3763[107th] Conference Report was 99-0. One senator was not present to vote.

13. Over the past several decades, corporate internal control processes have become a first-orderpolicy option to respond to a plethora of national problems. The early 1970s saw overseas

AAAJ23,6

788

bribery scandals and the Watergate controversy, resulting in passage of the Foreign CorruptPractices Act (FCPA) (US Congress, 1977). Langevoort (2006) notes that the FCPA requiredpublic companies to implement an adequate system of internal controls. The focus oninternal controls as a response to crises continued with passage of the Patriot Act (USCongress, 2001) to combat terrorism. It is not surprising that internal control processes werea major part of S-OX in response to the corporate scandals and resulting market turmoil.

References

Aune, J. (2001), Selling the Free Market: The Rhetoric of Economic Correctness, Guilford Press,New York, NY.

Bagdikian, B. (2004), The New Media Monopoly, Beacon Press, Boston, MA.

Ball, R. (2009), “Market and political/regulatory perspectives on the recent accounting scandals”,Journal of Accounting Research, Vol. 47 No. 2, pp. 277-323.

Barr, S. and Lambert, K. (1998), “Misreporting results”, CFO.com, Vol. 14 No. 12, pp. 36-44.

Becker, G. (1986), An Economic Analysis of the Family, Economic and Social Policy ResearchInstitute, Dublin.

Berle, A. and Means, G. (1932), The Modern Corporation and Private Property, TransactionPublishers, New Brunswick, NJ.

Blyth, M. (2002), Great Transformation: Economic Ideas and Institutional Change in theTwentieth Century, Cambridge University Press, Cambridge.

Brook, Y. and Epstein, A. (2002) Vol. 18, “What is killing the stock market? governmentregulation”, Capitalism Magazine, available at http://capmag.com/article.asp?ID¼1751(accessed March 18, 2006).

Bush, G.W. (2002), available at: www.sec.gov/about/laws.shtml (accessed May 5, 2009).

Carnegie, A. (1901), The Gospel of Wealth and Other Timely Essays, The Century Company, NewYork, NY.

Center for Responsive Politics (2009), available at: www.opensecrets.org/industries/indus.php?ind¼F11 (accessed October 22, 2009).

Chomsky, N. (1999), Profit over People, Seven Stories Press, New York, NY.

Coffee, J.C. (2003), “What caused Enron? A capsule of social and economic history of the 1990s”,Columbia Law School Working Paper Series, Columbia Law School, New York, NY.

Conference Board (2003), Conference Board Commission on Public Trust and Private Enterprise,The Conference Board, New York, NY.

Conrad, C. (2004), “The illusion of reform: corporate discourse and agenda denial in the 2002corporate meltdown”, Rhetoric & Public Affairs, Vol. 7 No. 3, pp. 311-41.

Cooper, C. (2005), “Accounting for the public interest: pubic ineffectual or public intellectuals?”,Accounting, Auditing & Accountability Journal, Vol. 18 No. 5, pp. 592-607.

Cornehls, J. (2004), “Veblen’s theory of finance capitalism and contemporary corporate America”,Journal of Economic Issues, Vol. 38 No. 1, pp. 29-58.

Court, J. (2003), Corporateering: How Corporate Power Steals Your Personal Freedom, JeremyTarcher/Putnam, New York, NY.

Dahl, R. (1957), “The concept of power”, Behavioral Science, Vol. 2 No. 3, pp. 201-5.

Dugger, W.M. (1989), Corporate Hegemony, Greenwood Press, Westport, CT.

Foucault, M. (1980), Power and Knowledge, Pantheon Books, New York, NY.

Friedman, M. (1953), Essays in Positive Economics, The University of Chicago Press, Chicago, IL.

Neoliberalism,deregulation and

S-OX

789

Friedman, M. (1981), The Invisible Hand in Economics and Politics, Institute of Southeast AsianStudies, Singapore.

Frontline (2005), “Congress and the accounting wars”, available at www.pbs.org/wgbh/pages/frontline/shows/regulation/congress (accessed May 5, 2009).

George, S. (1999), “A short history of neoliberalism”, Conference on Economic Sovereignty in aGlobalising World, available at www.global-awareness.net/RootsofChange/module%204/2%20Neoliberalism,%20Short%20History.htm (accessed February 20, 2010).

Giroux, H.A. (2005), “The terror of neoliberalism: rethinking the significance of cultural politics”,College Literature, Vol. 32 No. 1, pp. 1-19.

Goldstein, B. (2002), “Greenspan shrugged”, New York Times, July 21, available at www.nytimes.com/2002 (accessed January 25, 2006).

Government Accounting Office (GAO) (2002), Financial Statement Restatements – Trend,Market Impacts, Regulatory Responses and Remaining Challenges, GovernmentAccounting Office, Washington, DC.

Gramsci, A. (1971), Selections from the Prison Notebooks of Antonio Gramsci (translated byHoare, Q. and Smith, G.N.), International Publishers, New York, NY.

Gramsci, A. and Smith, D. (Eds) (1985), Selections from Cultural Writings (translated byBoelhower, W.), Harvard University Press, Boston, MA.

Greenwald, M. and Bernt, J. (Eds) (2000), The Big Chill: Investigative Reporting in the CurrentMedia Environment, Iowa State University Press, Ames, IA.

Greifeld, B. (2006), “It’s time to pull up our SOX”, The Wall Street Journal,, March 6.

Hayek, F. (1944), The Road to Serfdom, Routledge & Son, London.

Huffington, A. (2003), Pigs at the Trough: How Corporate Greed and Political Corruption AreUndermining America, Crown Publishers, New York, NY.

Jensen, M. (2001), “How stock options reward managers for destroying value and what to doabout it”, Harvard NOM Working Paper No. 04-27, Harvard NOM, Boston, MA, availableat: http://ssrn.com (accessed November 12, 2009).

Jensen, M. and Meckling, W. (1976), “A theory of the firm: governance, residual claims andorganizational forms”, Journal of Financial Economics, Vol. 3 No. 4, pp. 305-60.

Klein, N. (2007), The Shock Doctrine: The Rise of Disaster Capitalism, Henry Holt and Company,New York, NY.

Lakoff, G. (2003), “Framing the issues: UC Berkeley professor George Lakoff tells howconservatives use language to dominate politics”, interview by B.A. Powell, October 17,available at www.berkeley.edu/news/media/releases/2003/10/27_lakoff.shtml (accessedJanuary 5, 2006).

Langevoort, D. (2006), “Internal controls after Sarbanes-Oxley: revisiting corporate law’s ‘duty ofcare as responsibility for systems’”, The Journal of Corporation Law, Vol. 31 No. 3,pp. 949-73.

Levitt, A. (1998), “The ‘Numbers Game’, remarks by A. Levitt”, September 28, available at: www.sec.gov/news/speech/speecharchive/1998/spch220.txt (accessed February 23, 2010).

Longstreth, B. (1983), “The SEC after fifty years: an assessment of its past and future”, ColumbiaLaw Review, Vol. 83, pp. 1593-8.

Lukes, S. (1994), Power: A Radical View, Macmillan, London.

McChesney, R. (1999), “Introduction” in Chomsky, N., Profit over People, Seven Stories Press,New York, NY..

AAAJ23,6

790

Michalitsch, G. (2004), “What is neoliberalism?”, available at: http://archive.ncimc.org.newswire/display/29189/index.php (accessed 16 October 2009).

Mills, C.W. (1956), The Power Elite, Oxford University Press, New York, NY.

Peters, A. (2004), “Sarbanes-Oxley Act of 2002, congress’ response to corporate scandals: will thenew rules guarantee ‘good’ governance and avoid future scandals?”, Nova Law Journal,Vol. 28 No. 2, pp. 283-92.

Polanyi, K. (1944), The Great Transformation, Beacon Press, Boston, MA.

Pollin, R. (2003), Contours of Descent: US Economic Fractures and the Landscape of GlobalAusterity, Verso Press, New York, NY.

Previts, G. and Merino, B. (1998), A History of Accountancy in the USA: An HistoricalInterpretation of the Cultural Significance of Accounting, The Ohio State University Press,Columbus, OH.

Rawls, J. (1971), Theory of Justice, Harvard University Press, Boston, MA.

Reberioux, A. (2007), “Does shareholder primacy lead to a decline in managerial accountability?”,Cambridge Journal of Economics, Vol. 31 No. 4, pp. 507-24.

Reiter, S. (1998), “Economic imperialism and the crisis in financial accounting research”, CriticalPerspectives on Accounting, Vol. 9 No. 2, pp. 143-71.

Ribstein, L. (2002), “Market vs regulatory responses to corporate fraud: a critique of theSarbanes-Oxley Act of 2002”, Journal of Corporation Law, Vol. 10, pp. 2-74.

Rothschild, K. (2003), “Reflections on an anniversary: Friedman’s capitalism and freedom”,Journal of Economic Studies, Vol. 30 No. 5, pp. 548-57.

Schiller, H. (1992), Mass Communications and the American Empire, 2nd ed., Westview Books,Boulder, CO.

Schlesinger, J.M. (2002), “The deregulators: did Washington help set stage for current businessturmoil?”, Wall Street Journal, October 17, p. A1.

Soederberg, S. (2008), “A critique of the diagnosis and cure for ‘Enronitis’: the Sarbanes-OxleyAct and neoliberal governance of corporate America”, Critical Sociology, Vol. 34 No. 5,pp. 657-80.

SOX-online (2009), available at: www.sox-online.com/act_toc.html (accessed April 27, 2009).

Staats, J.L. (2004), “Habermas and democratic theory: the threat to democracy of uncheckedcorporate power”, Political Research Quarterly, Vol. 57 No. 4, pp. 585-94.

Stein, M. (2008), “Beyond the boardroom: governmental perspectives on corporate governance”,Accounting, Auditing & Accountability Journal, Vol. 21 No. 7, pp. 1001-25.

Stiglitz, J.E. (2003), The Roaring Nineties: A New History of the World’s Most Prosperous Decade,W.W. Norton & Co., New York, NY.

Sumner, W. (1963), Social Darwinism, Prentice Hall, Englewood Cliffs, NJ.

Tabb, W. (2003), “After neoliberalism?”, Monthly Review, Vol. 55 No. 2, pp. 25-32.

Tracey, A.M. and Fiorelli, P. (2004), “Nothing concentrates the mind like the prospect of ahanging: the criminalization of the Sarbanes-Oxley Act”, Northern Illinois University LawReview, Vol. 25, pp. 125-50.

US Congress (1933), Banking Act (Glass Steagall Act), Senate HR 5661, US Congress, Washington,DC.

US Congress (1934), Securities Exchange Act, Senate HR 881, US Congress, Washington, DC.

US Congress (1970), Securities Investor Protection Act, Senate HR 19333, US Congress,Washington, DC.

Neoliberalism,deregulation and

S-OX

791

US Congress (1977), Foreign Corrupt Practices Act, Senate HR 3815, US Congress, Washington,DC.

US Congress (1995), Private Securities Litigation Reform Act, Senate HR 1058, US Congress,Washington, DC.

US Congress (1996), National Securities Market Improvement Act, Senate HR 3005, US Congress,Washington, DC.

US Congress (1999), Financial Services Modernization Act (Gramm-Leach-Bliley Act), SenateHR 10, US Congress, Washington, DC.

US Congress (2001), Patriot Act, Senate HR 3162, US Congress, Washington, DC.

US Congress (2002), Sarbanes-Oxley Act, Senate HR 3763, US Congress, Washington, DC.

Vidal, M. (2002), “The corporate ethics red herring”, Counterpunch, July 12, available at: www.counterpunch.org/vidal0712.html (accessed March 19, 2006).

Watts, R. and Zimmerman, J. (1979), “The demand for and supply of accounting theories: themarket for excuses”, The Accounting Review, Vol. 54 No. 2, pp. 273-305.

Weismann, M. (2004), “Corporate transparency or congressional window-dressing? The caseagainst Sarbanes-Oxley as a means to avoid another corporate debacle: the failed attemptto revive meaningful regulatory oversight”, Stanford Journal of Law, Business & Finance,Vol. 10, pp. 98-137.

Williams, J. (2003), “Accounting for Enron: media accounts, cultural narratives, and thereproduction of ‘faith’ in the markets”, working paper, presented at Financial ReportingUnder Public Scrutiny: Reflecting on the Series of Recent Accounting Abuses, Universityof Alberta, Alberta.

About the authorsBarbara D. Merino is Horace Brock Chair and Regent’s Professor of Accounting at University ofNorth Texas. She has published numerous articles in scholarly journals, such as The AccountingReview, Accounting Organizations and Society, and The Journal of Business, Finance andAccounting.

Alan G. Mayper is a Professor of Accounting at University of North Texas. His teachinginterests are primarily financial accounting and accounting theory. He has published in the toptier research journals in accounting, including Journal of Accounting Research and Accounting,Organizations and Society.

Thomas D. Tolleson is a Professor of Accounting at Texas Wesleyan University. His teachinginterests are primarily in cost accounting, fraud examination and ethics. He has receivedoutstanding teaching awards at both the undergraduate and graduate levels and has publishedin Journal of Applied Case Research, Perspectives in Business and Research on Accounting Ethics.Thomas D. Tolleson is the corresponding author and can be contacted at: ttolleson@txwes.edu

AAAJ23,6

792

To purchase reprints of this article please e-mail: reprints@emeraldinsight.comOr visit our web site for further details: www.emeraldinsight.com/reprints