You have been asked to join the board of a large corporation, what would be some...

You have been asked to join the board of a large corporation, what would be some of the questions that you should ask and what are the answers that you are expecting? Explain the Sarbanes and Oxley Act of 2002 and impact on corporate governance.

BUSINESS ETHICS CLASS

Expert Solution

While joining the board of a large corporation following questions need to be addressed:-

Does the company have a need for my expertise?
How does my experience complement that of the other board members?
Who are the other directors and what is their background and expertise?
Does the board have meaningful discussions or does it tend to follow management’s direction?
What is the CEO’s leadership style and does he or she value and listen to the board?
What type of information do directors receive and how often?
What is the company’s financial position?
What is the indemnification provision for directors?
How often are board meetings held and where do they take place?

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 cracks down on corporate fraud. It created the Public Company Accounting Oversight Board to oversee the accounting industry. It banned company loans to executives and gave job protection to whistleblowers. The Act strengthens the independence and financial literacy of corporate boards. It holds CEOs personally responsible for errors in accounting audits. It became law on July 30, 2002. The Securities and Exchange Commission enforces it.

Impact on Corporate Governance:

The act had a profound effect on corporate governance in the U.S. The Sarbanes-Oxley Act requires public companies to strengthen audit committees, perform internal controls tests, make directors and officers personally liable for accuracy of financial statements, and strengthen disclosure. The Sarbanes-Oxley Act also establishes stricter criminal penalties for securities fraud and changes how public accounting firms operate. One direct effect of the Sarbanes-Oxley Act on corporate governance is the strengthening of public companies' audit committees. The audit committee receives wide leverage in overseeing the top management's accounting decisions.

Rahul Sunny answered 2 years ago

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