Mother Nature Needs Her SOX: Reviewing the Impetus and Goals of the Increased Financial Regulations of the Sarbanes-Oxley Act and How They Parallel the Needs of Today's Environmental Protection Agency
As climate change and natural disasters appear to be increasingly prevalent across the United States, the question of how to respond to these threats looms large. Arguably, the Environmental Protection Agency (“EPA”) represents the tip of that responding spear. The agency, literally dedicated to protecting the environment, is positioned to drive industry environmental standards, set sustainable metrics, and even determine thresholds for habitable life.
Looks can be deceiving, though. This Note examines the current state of the EPA, and the minimal effect it currently has on penalizing and deterring industry environmental degradation. It specifically focuses on a number of high-profile use cases of industry pollution, and the EPA’s response. Based on the apparent impotence of those responses, this Note then draws a direct parallel to the Securities and Exchange Commission (“SEC”) during the late nineties and early aughts, before the Sarbanes-Oxley act was passed.
The corporate incentives of violating the EPA standards today directly parallel the incentives of businesses committing securities fraud back then. In short, there lacked a sufficient deterrent to counterbalance the incentives of increasing shareholder value through any means (even illegal ones).
After the financial world was rocked with the repeated scandals of corporations like Enron, Worldcom, Tyco, etc., Congress responded by passing the Sarbanes-Oxley Act. The Act has three key objectives that resonate with today’s EPA: 1) clearer accountability; 2) expanded criminal liability; and 3) enhanced criminal penalties. The Sarbanes-Oxley Act worked because it drove accountability into the executive boardroom.
The final piece of this Note replicates the model of Sarbanes- Oxley and examines the implications of a similar act in the context of the EPA through the same use cases detailed above. While the Sarbanes- Oxley Act was directed to protecting shareholder value, the EPA equivalent would have an even broader mandate, protecting the world itself.