Corporate Governance Of The Sarbanes Oxley Act Of 2002

1844 WordsApr 5, 20178 Pages
As of today, an international corporate governance model does not exist. Corporations are bound by the laws and regulations of a country and the shareholders’ expectations. Even countries with similar histories, customs, languages, and ethnicities such as the United Kingdom (“U.K.”) and the United States (“U.S.”) have different corporate governance standards (Monks & Minow, 468). While the U.K. has a separate code of corporate governance with guidelines, the U.S. incorporates their governance policies within their laws. The U.S. regulates corporate governance through the Sarbanes-Oxley Act of 2002 ("SOX"), the Securities & Exchange Commission (“SEC”), and stock exchange guidelines. U.S. corporations are registered in particular states, so…show more content…
U.S. organizations are held by many shareholders who are uninvolved in the daily running of the company. Institutional investors usually have the largest stakes. Governance of companies is determined by the states, but U.S. states do not give shareholders many enforceable rights. This is different in the U.K., where the shareholders and their objectives are the purpose of financial reporting (ValueWalk). The Institutional Investors Committee (“IIC”) of the U.K. adopted a statement of codes and responsibilities. This statement includes clarifying the priorities for certain matters and deciding when to take action; observing the performance of and having conversations with portfolio companies; intervening when necessary; assessing the influence of activism efforts; and reporting back to clients and owners (Monks & Minow, 2011). In the U.K., the shareholders are the customer and the enforcers, whereas in the U.S., companies are focused on how well they are doing in the market. The U.S. has separation of ownership and management. SOX gave the SEC the ability to prevent people from serving as officers and directors. Non-executive directors oversee the managers’ performance. The board of directors includes the executive & the non-executive directors who plan the path of the organization. The independent directors’ main responsibility is to manage all activities of the management board.
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