What key legislation significantly impacted corporate governance in the U.S.?

The Sarbanes-Oxley Act of 2002 is widely recognized for its profound impact on corporate governance in the U.S. This legislation was enacted in response to a series of high-profile accounting scandals, including those involving Enron and WorldCom, which eroded investor confidence.

The primary objectives of the Sarbanes-Oxley Act are to enhance the accuracy and reliability of corporate disclosures and to protect investors from fraudulent financial practices. Key provisions require senior executives to take personal responsibility for the accuracy of financial statements, which means they must certify financial reports and disclosures. Additionally, it established stricter penalties for fraudulent financial activity and mandated that public companies implement internal controls and reporting processes. These changes aimed to promote transparency and accountability in corporate governance, thus restoring public trust in American companies and capital markets.

In contrast, while the Dodd-Frank Act also addressed financial stability and market transparency, its focus is broader, encompassing financial institutions and systemic risk management rather than solely on corporate governance practices. The Glass-Steagall Act primarily dealt with separating commercial and investment banking to prevent conflicts of interest, while the Securities Exchange Act of 1934 focused on regulating securities transactions to protect investors. However, none of these pieces of legislation had as direct an influence