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Rationale for Public Policy Essay

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Updated: Mar 21st, 2019

Federal laws are put in place to ensure that the public is protected and that injustices do not harm the citizens of the United States of America. There are numerous federal laws that cover the economy, agriculture, education, Assets and security of Americans.

Every country in the world has governmental entities endorse laws, formulate policies, and allocate all necessary resources that aim to ensure that justice and order or some form of equity exists in a given society. Public policy is commonly defined as an arrangement of laws, regulatory mechanisms that are put in place by a governmental or its representatives to govern the sovereignty of a Nation and its citizens (Welytok 2008).

One such example is SOX/SABOX (The Sarbanes Oxley act of 2002) that governs the financial system of America with the intention of restoring public confidence and protecting all individuals that intend to invest in America. Accountability of public funds is a key pillar of a financial system, the recent corporate debacles and cases of poor corporate governance in the United States have led to the loss of faith in financial institutions, among the American public including financial investors.

The level of greed and carelessness shown by corporate executives led to an uproar by the American public who blame the government for not placing strict rules and regulations that will govern the financial framework in the

United States Corporate debacles like Enron, WorldCom, Adelphia, led legislators in the U.S.A to reexamine public policy and ensure that those who invested their hard earned cash within the American financial system would be protected the American public from cases of malicious fraud and also negligence of financial managers in the American economy (Welytok 2008).


The Sarbanes-Oxley act 2002 also known as the public Accounting Reform Act in the American senate and as the corporate and Auditing Accountability and Responsibility Act was enacted to enhance the standards under which American companies both public listed companies together with regulatory bodies should work in bringing about a more sound financial system and restore public confidence in the American financial system which had been missing in the American public because of numerous corporate debacles that followed the failure of Enron, Adelphia and WorldCom (Welytok 2008).

This entire legislation was formed with the intention of protecting all stakeholders who are either directly or indirectly interested in the financial system of the U.S.A. The 11 titles of the law were created to address the interests’ stakeholders such as

  1. The government
  2. Financial institutions employees (i.e. managers, directors and employees)
  3. The common American investor
  4. Foreign investors
  5. Regulatory bodies ( i.e. the Security Exchange Commission, Public Company Accounting Oversight Board)
  6. Auditors
  7. Stock market traders and participants ( i.e. security analysts)
  8. Legislators
  9. Investment firms and the banking systems

The public policies in the financial system that were introduced by SABOX ensured that the America financial system was to some degree streamlined and that those investors who invested in the American financial system had their funds protected by law and this increased the level of confidence in the American financial system and institutions (Welytok 2008).

Initial Hypothesis

SABOX is considered as good legislation that put most institutions and those participating in the American financial system on a tight leash ensuring that accountability and management within the financial system was more strict and responsible (Welytok 2008).

The loss of confidence in the American financial system by individuals was reversed by this law and investors could hence invest with a sense of security hence bringing to light the good aspects of this law, although many financial institutions complained that compliance and implementation costs of this federal law into financial the American financial system was going to be quite high the benefits of the public policies in the financial system that will come about as the result of SABOX are expected to be enjoyed on the long run.


Welytok, J.G. (2008). Sarbanes-Oxley for Dummies.2nd edn. Indianapolis: Wiley Publishers.

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