Form over Substance?: Officer Certification and the Promise of Enhanced Personal Accountability under the Sarbanes-Oxley Act

The theme of personal accountability for corporate managers has emerged as a mantra in the wake of the recent allegations of securities fraud associated with the disclosure documents of several major public companies. Over the past year, dozens of public companies have admitted to filing disclosure documents with the Securities and Exchange Commission (the "SEC") that contained significant accounting inaccuracies. [FN1] These inaccuracies forced such companies to restate their earnings, wiping out millions of dollars in profits, and triggering employee lay-offs, shareholder losses, and in some cases, bankruptcy. [FN2] The magnitude of the errors led to charges that such corporations had engaged in securities fraud by deliberately manipulating their financial statements and related information. [FN3] Subsequent investigations suggested that corporate *2 managers either were intimately involved with such manipulation, or failed to monitor appropriately those who were involved. [FN4] These investigations also suggested that current law failed to hold corporate officers personally responsible and accountable for the affairs of the corporations they govern. [FN5] In the legislature's view, this failure enabled many corporate officials to acquiesce, if not participate, in fraudulent securities practices without fear of personal liability. Attempting to remedy this failure, Congress recently enacted the Sarbanes- Oxley Act of 2002 (the "Sarbanes Act"). [FN6] President George W. Bush claims that the law ushers in a "new ethic of personal responsibility in the business community." [FN7] One provision of the Sarbanes Act, appearing to exemplify this ethic, requires chief executive officers ("CEOs") and chief financial officers ("CFOs") of every public company to personally certify the accuracy of their company's financial statements, [FN8] and imposes criminal sanctions on officers who fail to properly make such certification. [FN9] Supporters of this certification believe that it will ensure that corporate officials personally account for financial information related to their companies. [FN10] As the President proclaimed, "[w]hen you sign a *3 statement, you're pledging your word, and you should stand behind it." [FN11] Similarly, the Chairman of the House Judiciary Committee stated that officer certification "will make CEOs directly responsible for the integrity of their company's financial statements." [FN12] Because officer certification serves as an important symbol of the Sarbanes Act's goal of ensuring personal responsibility among corporate officers, analyzing its potential impact represents an ideal vehicle for exploring the extent to which the Sarbanes Act can meet its goal. However, this Article argues that the personal certification requirement may not progress beyond the symbolic. Indeed, the SEC has explained that a personal certification requirement does not alter the existing law related to officer liability for a company's financial statements. [FN13] Review of the case law appears to support this explanation. [FN14] Yet if the current climate serves as any indicator, the *4 existing law has not served to promote personal responsibility among corporate officers. This conclusion provides cause for pessimism about the new certification's potential to meet its goals. This Article reveals that this pessimism may be warranted. This Article begins with an examination of the incidents that led to the perceived need for procedures to ensure the personal responsibility of corporate executives, and the manner in which the Sarbanes Act's new certification seeks to meet that need. Part I also explores the manner in which the existing signature requirements for disclosure