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Chapter 2. CORPORATE GOVERNANCE OVERVIEW, to miltigate C.G. risks and…
Chapter 2.
CORPORATE GOVERNANCE OVERVIEW
Theories
Shareholer
managers have to maximize returns of shareholers
Stakeholder
Focous broadens to costumers, suppliers, employees, and others who have an interest in the comany
Players
Board of directors
oversees management
sets strategy
Management
executes strategy
Capital suppliers
For activities and operations
Shareholders
Creditors
Suppliers
Human Capital
Employees
Government and Regulators
Protects interests of citizens
External Forces
Legal enviroment
Competition
Reports and acts
Cadburry Report
were influential in shaping global corporate governance landscape
Adrian Chadburry
chairman of Chaburry company
British multinational confectionary company
fully owned by Mondelez International since 2010
the second largest confectionery brand in the world after Mars
sets out recommendations on the arrangement of
company boards
auditing systems
Sarbanes-Oxley Act of 2002
General
mandated strict reforms to existing securities regulations and imposed tough new penalties on lawbreakers.
came in response to financial scandals in the early 2000s involving publicly traded companies such as
Enron Corporation
Tyco International plc
WorldCom
helps to protect investors from fraudulent financial reporting by corporations.
The high-profile frauds shook investor confidence in the trustworthiness of corporate financial statements and led many to demand an overhaul of decades-old regulatory standards.
Major Provisions
Section 302
senior corporate officers personally certify in writing that the company's financial statements comply with SEC disclosure requirements and "fairly present in all material respects the financial condition and results of operations of the issuer" at the time of the financial report.
Officers who sign off on financial statements that they know to be inaccurate are subject to criminal penalties, including prison terms.
Section 404
requires that management and auditors establish internal controls and reporting methods to ensure the adequacy of those controls.
Some critics of the law have complained that the requirements in Section 404 can have a negative impact on publicly traded companies because it's often expensive to establish and maintain the necessary internal controls.
Section 802
contains the three rules that affect recordkeeping
The first deals with destruction and falsification of records
The second strictly defines the retention period for storing records
he third rule outlines the specific business records that companies need to store, which includes electronic communications.
Technology side
Besides the financial side of a business, such as audits, accuracy, and controls, the SOX Act of 2002 also outlines requirements for information technology (IT) departments regarding electronic records.
The act does not specify a set of business practices in this regard but instead defines which company records need to be kept on file and for how long.
The standards outlined in the SOX Act of 2002 do not specify how a business should store its records, just that it's the company IT department's responsibility to store them.
to miltigate C.G. risks and failures