RUNNINGHEAD: Final Exam Final Exam Rasillah Evans University of Phoenix May 23, 2010 Introduction With a multitude of conflicting expectations, modern companies can be complex regarding the environmental, societal, and long-term impacts of the business. Because too often individual shareholders will not ask the difficult questions on how corporations are effecting the environment, society and the economy, it is as a result the accountability of the institutional shareholders to take this challenge to big companies on behalf of the individuals that they represent. Final Exam
Different committees have to be established and put into process in order for a company to represent good corporate governance. The Audit Committee is significant in regards to corporate governance because it assist the board of directors in achieving the fiduciary and financial responsibilities to shareholders as well as assuring corporate governance accountability. Audit committees are mainly accountable for the quality connected to such matters as: • Regulatory and legal matters • Financial reporting process • Internal auditing process • External auditing process • Internal controls Conflicts of interest (code of corporate conduct, fraud presentation) (enotes. com) • Other matters (interim reporting, information technology, officers’ expense accounts) The Audit Committee has to be made up of independent outside directors and a financial expert. Since the company is publically traded, it has to be listed on the U. S. Stock Exchange. The importance of the Ethics Committee is to review, oversee and monitor compliance of a company directors, employees and officers. The Compensation Committee is responsible for the corporation’s overall compensation. The Committee must have at least three members at all times.
It is also the responsibility of the committee to produce an annual report on the compensation for executives that has to be included in the proxy statement presented at the annual meeting of stockholders. The most important purpose of the Compensation Committee is to put into process and execute compensation plans and policies that are proper for the Company in light of all applicable situations which provide incentive that advances the Company’s long-standing strategic plan and are constant with the culture of the Company and the general goal of enhancing long-term stockholder value.
The Corporate Governance Committee will hold the responsibility of recommending to the board the replacement and selection of, if necessary, of the Chief Executive Officer. The committee will also periodically provide input to the Compensation Committee on how the CEO is performing in light of objectives and goals. It is important for companies to understand the importance of long-term compensation is of significance to its employees. Stock options are a long-term compensation that will help maintain the focus of executives regarding their management of the business for the future which will provide the business much success in the market.
Sarbanes Oxley Reporting and Quarterly Reports Lack of compliance and corporate scandals have become a subject of social concern. Management has to implement strong internal controls systems that will prevent misconduct. The Sarbanes-Oxley act of 2002 (SOX) is a comprehensive legislative restructuring which came about as an end result of a highly publicized list of corporate scandals which involves misconduct and alleged fraud. The act calls for widespread transformation in financial disclosure and reporting systems for publicly held companies and places precise restrictions on how these corporations and their auditors can operate.
With the deadlines determinedly in place for obligatory compliance to these regulations, public companies are rushing to bring their corporations in full concurrence in a timely approach and without penalties. In addition many companies that are future focused are revising and re-evaluating their internal reporting and auditing procedures as well. The quarterly report also known as form SEC-10 is a requirement for public companies to disclose their financial conditions, material events and management goals. The report is important because it offers a picture of current financial situations and operating conditions.
Consequences of the report not being issued could result in the fall of stock prices for the company. On the other hand, if a corporation is meeting the requirements of the market analysis, such fall can be avoided. References Burgess, M. (2009) Good Corporate Governance retrieved from http://www. legalandgeneralgroupcsr. com/what_matters_to_us/good_corp_governance. aspx Lawson, G. (2010) Executive Compensation Surveys, Compensation Consultant retrieved from http://www. foxlawson. com/executive_compensationPT2. html www. enotes. com