Who Does Sarbanes-Oxley Support And How Does It Work?

Sarbanes-Oxley is a federal law that has been helping employees protect themselves from retaliation for decades. How does it protect them? North Carolina retaliation attorney Kathryn Abernethy breaks it down for you here. This is part of our recurring series where Raleigh Attorney Abernethy discusses employment law in North Carolina. For more videos from this series, click here. You can also check out the transcription below.

Transcription: Who Does Sarbanes-Oxley Support And How Does It Work?

Sarbanes-Oxley exists because of the Enron scandal, basically. With issue and problems with companies going belly up or misreporting financial results. And you know, their investors, often times pension funds or individual investors who are retired. Maybe they were an employee of that company for a lot of years. They tried to retire on their company’s stock and now it’s worthless. That’s really who Sarbanes-Oxley is there to protect.

It’s not necessarily there in the first instance to protect the employee, but what it tries to promote is transparency by the company and in its financial reporting and in the integrity of its financial reporting to its shareholders and to the public in general.

Sarbox (Sarbanes-Oxley) does have an anti-retaliation provision. So, if you are an internal whistleblower who, for example, goes to the general counsel’s office, the ethics hotline, or to somebody in a position of authority in the company and says, “hey, I’m noticing that this particular adverse condition that’s going to affect the stock price has not been fronted with the shareholders. That’s a problem because you know, we’re down the road, road a ways on doing this.”

That’s going to give rise to a right to anti retaliation protection under Sarbox.

Another thing that is actually protected by Sarbanes-Oxley, and this is kind of lesser known is if the financial systems at a company are flimsy or they don’t have good internal controls over their over the integrity of their financial data.

That’s also a situation where Sarbanes-Oxley encourages a whistleblower to step up and say, “hey, you’ve got an internal controls problem here where the financial information that investors are being given isn’t reliable.” That too will trigger Sarbanes-Oxley protection for whistleblowers.