Wilt, Michael Patrick, The Political Economy of Corporate Financial Regulatory Legislation (February 19, 2016). John Marshall Law Review, Vol. 49, No. 3, 2016. Available  for download at SSRN: http://ssrn.com/abstract=2734991

“Every few years over the last several decades, Congress has been faced with the question of how to best regulate corporate financial activities. In the late 1970’s, concern for bribery overseas by American businesses led to passage of the Foreign Corrupt Practices Act (SOX). In the early 2000’s, concern over misreporting of financial activities led to passage of the Sarbanes-Oxley Act. In both of these laws, corporations are required to follow new rules and regulations relating to financial reporting and disclosure. How influential were business interests in shaping the passage of these two laws, and what lessons can we learn from the legislative history to inform future debates over corporate financial regulatory legislation? This paper considers this question by examining the legislative history in both the House and Senate during the debate over both the FCPA and SOX. Using Richard Posner’s theory of interest groups in his foundational law and economics piece, Theories of Economic Regulation, the article evaluates the impact of business special interest groups in shaping the legislation and find that as a general matter, the business “interest” was relatively weakened by political forces and lack of strong coordination and common interest. One business interest – accounting – was a proponent of new rules and regulations and has remained supportive ever since passage of these laws. While both laws have had a tremendous impact on businesses in terms of compliance and investigation, the accounting industry has derived a benefit from higher auditing fees, more arduous auditing needs, and economic concentration in its own industry. When a new corporate financial scandal arises in the future, it is important for policymakers to understand the unintended effects of legislation and to pause before rushing in to regulate corporate financial reporting.”