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John W. Cioffi

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enforcement; private litigation; Regulation; Sarbanes-Oxley


Congress passed the Sarbanes-Oxley Act of 2002 in reaction to the enormous political pressures generated by the wave of corporate financial scandals during 2001-2002. The Act's innovative reforms of corporate governance law were shaped by powerful political constraints on the use of private litigation and tensions over the use of "structural regulation" to alter the internal governance structures and procedures of publicly traded corporations. The conservative political realignment during 1990s precluded the development or expansion of litigious enforcement mechanisms (i.e., private causes of action) to curb corporate and managerial financial misconduct. Consequently, a number of the Sarbanes-Oxley Act's core provisions took the form of structural regulation intended to function as non-litigious, self-executing mechanisms of regulation. Political constraints on the use of private litigation as an enforcement mechanism entailed a more direct intervention of state power within the corporation and blurred the established boundaries between the public and private spheres. However, the legislative reforms did not alter the core processes of corporate managerial power - the nomination and election of directors to the board. When the SEC attempted to do so, it threatened encroachment on the private sphere and the institutional bases of managerial power and autonomy and produced a backlash by business elites against further reforms and against the underlying logic of Sarbanes-Oxley itself.