After the dramatic convictions in the Enron fraud trial, analysts expect fresh scrutiny of the law, inspired by one of corporate America's worst scandals, toughening standards for business leaders.
The guilty verdicts in the Texas trial of former Enron chief executives Kenneth Lay and Jeffrey Skilling may prompt fresh debate in Congress over the ethics law passed in 2002 at the height of the scandals, known as the Sarbanes-Oxley Act.
The Enron scandal shook the corporate world and "it did spark wholesale change" in corporate regulation, said Henry Hu, professor of corporate governance at the University of Texas.
"And right now, we are rethinking whether all the changes made sense from a cost-benefit standpoint."
A storm of protests from US businesses and foreign firms listed in the United States over the costs of compliance has reached Congress, where efforts are underway to modify the law. The Sarbanes-Oxley law "imposed mechanistic bureaucratic procedures to overcome the natural propensities of human nature," said Alex Pollock, a resident fellow at the American Enterprise Institute, who said he hopes the Enron verdicts would be a "catharsis" that prompts a reform of the law. "I think it's high time to address the imbalance created by the law."
Some domestic and foreign companies have said they would delist their stocks from US markets rather than comply with the burdens of reporting under the new law.
"The high burden of regulation and compliance is potentially outsourcing America's lead in the world's capital markets," US Representative Tom Feeney, author of a reform measure, said last month. "More companies are increasingly turning to London or Luxembourg instead of New York. It is time to review the effects of Sarbanes-Oxley in order to maintain the net advantages and reform those provisions that put investors, companies, and the American economy at a disadvantage." The US Chamber of Commerce argues the regulations have cost billions of dollars.
"Entire industries have been consumed by multiple, sweeping demands from competing regulators for their data, e-mails, and correspondence," the Chamber said in a recent statement.
"These excesses have discouraged bold business decision making, have sent both domestic and foreign companies fleeing from public markets, and have hurt efforts to attract strong board members and executives to public companies."
Even supporters of the Sarbanes-Oxley law acknowledge it may have imposed excessive costs on publicly traded companies, forcing them to include an extra layer of audit controls and to complete additional paperwork. "I think we need to reform Sarbanes-Oxley," Thomas Donaldson, a professor of business ethics at the University of Pennsylvania's Wharton School who had testified in Congress in favour of the 2002 law, told AFP.
"It was rushed into existence. Its main aim was to calm the markets, to calm investor sentiment, which it did. At the same time it has been interpreted by accounting firms in extremely expensive, suffocating ways, and it costs way too much. The bang is not worth the buck."
But Donaldson said the Enron verdicts may work against a reform of the Sarbanes-Oxley law.
With the scandals mostly passed, Donaldson said, "We are now in a position where we can go back to Sarbanes-Oxley and reconsider things."
But the Enron verdict, he said, "makes people say we were right all along to get tough, that they were bad guys."
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