Which goal of CalPERS became part of Sarbanes-Oxley?

The goal of making the audit committee be totally composed of outside directors is a pivotal component of the Sarbanes-Oxley Act, which was enacted in 2002 in response to major corporate scandals. The legislation aimed to improve corporate governance and bolster investor confidence in the financial markets.

One of the key provisions of Sarbanes-Oxley is the requirement that audit committees be made up entirely of independent directors. This was established to ensure that the audit process is free from potential conflicts of interest, as outside directors do not have relationships with the company that could compromise their judgment. By mandating that audit committees consist solely of independent members, Sarbanes-Oxley strengthens the oversight of financial reporting and increases the accountability of the board regarding financial practices.

While the other options also highlight important governance practices, such as enhancing the role of outside directors on boards and in leadership positions, the specific inclusion of only outside directors on audit committees directly reflects a unique and critical aspect of the Sarbanes-Oxley framework aimed at protecting shareholders and ensuring fidelity in the financial disclosures of corporations.