The main purpose of the Sarbanes-Oxley Act is to enhance corporate governance and accountability. Enacted in response to major financial scandals in the early 2000s, such as Enron and WorldCom, the Act instituted rigorous reforms designed to improve the accuracy of financial reporting and restore public confidence in corporate governance.
The law established strict new rules regarding the financial management of companies, which included the requirement for senior executives to personally certify the accuracy of financial reports. This accountability at the executive level is critical in deterring fraudulent financial practices. Additionally, the Act provided protections for whistleblowers and outlined specific penalties for fraudulent financial activity, further strengthening corporate accountability.
The other choices do not reflect the primary aim of the Sarbanes-Oxley Act. While promoting free market competition or reducing corporate taxes may relate to broader economic goals, they are not the focus of this Act. Similarly, while employee retention is important for businesses, it is not a direct objective of Sarbanes-Oxley. The essence of this legislation lies in establishing a trustworthy corporate environment by ensuring that companies are held accountable for their financial conduct.