Organizations possessing strong corporate governance provide discipline for employees and a tacit structure for the company as a whole. The presence of ethical values and of a business culture of “honesty” results in better bottom line performance. Prentice and Spence (2007) show significant positive correlation between corporate governance and financial performance.
Governance Metrics International (2005) found in a study of 2500 international companies that SOX led to a 10% improvement in corporate governance performance of U.S. companies versus their foreign counterparts.
Shadab (2007) demonstrated that corporate governance structures have a powerful positive impact on innovation by public corporations. SOX places more emphasis on financial reporting and control. It increases the independence of and size of the board of directors. SOX increases both director and manager turnover and heightens the companies’ focus on regulatory compliance at all levels.