White-Collar Crime and Punishment

Reflecting public outrage over massive corporatescandals, Congress quickly enacted comprehensivebusiness reform measures known as the Sarbanes-OxleyAct (SOX). While the business community focused onSOX s reporting and control requirements, often over-looked were SOX s harsh punishments imposed forwhite-collar crime. Congress rejected the long-practiced approach of lenient treatment of theperpetrators of occupational crimes, opting for theconcept that severe penalties can effectively detercriminal behavior.Despite federal regulations that now requireorganizations to develop and promote corporatecultures of ethical conduct and legal compliance, astudy of the corporate codes of conduct of America slargest companies reveals that the businesscommunity has failed to use punishment as adeterrent.Failure to provideunambiguous consequences forillegal behavior is perceived by organizationalmembers as tacit approval of their misconduct.Corporations have spent millions complying withSOX s reporting measures, but are not implementingmeasures that could avoid future costly scandals.