Fang Fang Li's Reaction

To A Comparative Analysis of the SOX, the Proposed Philippine Corporate Reform Act (2004) and the SEC's Code of Corporate Governance

The scandals involving Andersen, one of the largest auditing service companies of the United States, and Estrada, the former president of the Philippines disclosed the weakness and instability in the stock market and the shortcomings of the law in protecting investors and in supervising and punishing acts committed in bad faith.

Due to the series of scandals, the confidence and trust of the public in public audit firms and the stock market was impaired. In response, the U.S. government passed the Sarbanes-Oxley Act (SOX) in 2002 in order to regulate and foster the development of its capital market, strengthen corporate governance and restore investor confidence.

The Philippine is following the track of the international standard for the capital market. Senate Bill No. 209, and House Bill No. 5260 contain provisions similar to those under the SOX for the protection of investors. However, I believe that there are still some specific areas for improvement:

1. The supervision and regulation of executive officers should be more detailed since they are the ones making decisions for the company.

2. The prohibition on personal loans to directors and executives should be implemented under Philippine law.

3. The Philippines should implement criminal penalties for acts similar to those punished under the Employee Retirement Security Act.

Moral, ethical, disciplined are significant traits of a good director or executive officer. The stability of the capital market needs both self-discipline on the part of directors and the regulation by the government. Both internal and external factors should be present at the same time to regulate the behavior of operators and protect investors.

Globalization is good for human society since they can develop through the sharing of experiences. Individual countries cannot isolate themselves from the track of the globe. Benchmarking against a developed country is a good way to speed up the development of a developing country. In this way, all human beings around the world may be able to share a better life and a perfect society.