Unfortunately, history has repeatedly shown that unscrupulous top managers, if unchecked, can exploit their power to defraud stockholders. This unpleasant reality became all too clear in 2001 when the fall of Enron kicked off a wave of corporate scandals. These scandals were characterized by financial reporting fraud and misuse of corporate funds at the very highest levels – including CEOs and CFOs. While this was disturbing in itself, it also indicated that the institutions intended to prevent such abuses were not working, thus raising fundamental questions about the adequacy of the existing corporate governance system. In an attempt to respond to these concerns, the U.S. Congress passed the most important reform of corporate governance in many decades – the Sarbanes-Oxley act of 2002.