UofP - MBA560 - DQs - Week Five - 07-03-06

UofP - MBA560 - DQs - Week Five - 07-03-06 - Week Five...

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Week Five Objectives Assess corporate governance mechanisms. Apply best practices of corporate governance. Align corporate governance with company objectives. Evaluate the ability of the organization's internal controls to comply with Sarbanes-Oxley. DQ 1 Week 5 What are some best practices of corporate governance? Given the fundamental nature of the changes that have occurred during the past several years in the framework of laws and regulations related to corporate governance, below are best practice guiding principles of corporate governance. However, consideration must be given to applicable legal requirements and securities market listing standards (which establish minimum requirements). Conversely, these principles, should assist most companies in their ongoing advancement of corporate governance practices and advance their ability to compete, create jobs, and generate economic growth. Best Practice Principles The paramount duty of the board of directors of a public corporation is to select a chief executive officer and to oversee the CEO and senior management in the competent and ethical operation of the corporation on a day-to-day basis (Business, 2005). It is the responsibility of management to operate the corporation in an effective and ethical manner to produce value for shareholders. Senior management is expected to know how the corporation earns its income and what risks the corporation is undertaking in the course of carrying out its business. The CEO and board of directors should set a “tone at the top” that establishes a culture of legal compliance and integrity (Chew, 2005). Management and directors should never put personal interests ahead of or in conflict with the interests of the corporation. It is the responsibility of management—under the oversight of the audit committee and the board —to produce financial statements that fairly present the financial condition and results of operations of the corporation and to make the timely disclosures investors need to assess the financial and business soundness and risks of the corporation (Deloitte, 2004). It is the responsibility of the board—through its audit committee —to engage an independent accounting firm to audit the financial statements prepared by management, issue an opinion that those statements are fairly stated in accordance with generally accepted accounting principles (GAAP) and oversee the corporation’s relationship with the outside auditor (Deloitte, 2004). It is the responsibility of the board—through its corporate governance committee —to play a leadership role in shaping the corporate governance of the corporation. The
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corporate governance committee also should select and recommend to the board qualified director candidates for election by the corporation’s shareholders (Lorsch, 2002). It is the responsibility of the board—through its
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UofP - MBA560 - DQs - Week Five - 07-03-06 - Week Five...

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