Chairman

Board of Directors

CEO

President

CFO

V.P.s

Management is responsible for maximizing shareholder wealth and should therefore also protect past, present, and future investments by making their company a safe and reliable place for investors to place their money.

Established new or enhanced standards for all U.S. public company boards, management, and public accounting firms.  Does not apply to privately held companies.  Purpose - to rebuild public trust in America's corporate sector, enforce good “corporate governance,” and prevent further corporate abuses.

 •

Corporate Governance: The system or framework of policies, rules. customs and processes by which companies are directed, administered and controlled. It is based on the principle that companies are accountable for their actions. It creates transparency, strengthens confidence in the company management and protects the shareholder.

 •

Transparency: A spirit of transparency means that companies willingly provide information needed by shareholders and other stakeholders to make decisions. Information is transparent when it provides the reader with a clear understanding of the company’s financial condition, results of operations, cash flows and other aspects of its business.

Internal Controls are systems and processes that • safeguard (protect) a company’s assets and resources, • deter and detect errors, fraud and theft, • ensure accurate and complete accounting data, • produce reliable and timely financial and management information, and • ensure adherence to its policies and plans.

 Internal

Controls:

• Requires that corporations maintain much better financial records and procedures than were required in the past.
 More

Stringent Financial Reporting

• Financial statements are required to be accurate and presented in a manner that does not contain incorrect statements or omit material information • Companies are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. • A company's CEO and CFO are accountable for the accuracy of filings

 

New regulation of Auditing Firms Boards of Directors:
• The board has the obligation to understand, to evaluate, to exercise oversight, to review and approve corporate actions. • New standards of accountability on the board of directors for U.S. companies. Beefed-up Audit Committee Corporate Governance Committee Compensation Committee

Chairman Governanc e Committee Compensatio n Committee

Board of Directors
Audit Committee

CEO

President

CFO

V.P.s

Whistleblowers:  Employees who raise concerns or leak information about financial fraud in their company are now protected by federal laws. They may not be threatened or harassed by their employer, or fired in retaliation for providing the information.  Audit Committees must create systems and procedures for receiving anonymous employee concerns about financial improprieties.

Lawsuits and negative publicity  A corporate officer who does not comply or submits an inaccurate certification is subject to a fine up to $1 million and ten years in prison, even if done mistakenly.  If a wrong certification was submitted purposely, the fine can be up to $5 million and twenty years in prison.

What do you think?

Fewer listings of companies on the New York Stock Exchange  Increased listings of companies on the London and other foreign exchanges

 Reduced

corporate risk-taking that produces economic growth. Why?
• Empowered, independent boards have reduced the discretionary authority of executives. It’s much easier to have your way when your pals or business partners have a seat in the boardroom, because (B)They’re less likely to stop you. (C)They’re less likely to kick you out if things go wrong.

1,236 total corporate fraud convictions to date, including: •214 chief executive officers and presidents; •53 chief financial officers; •23 corporate counsels or attorneys; and •129 vice presidents

U.S. President's Corporate Fraud Task Force , Fact Sheet: President’s Corporate Fraud Task Force Marks Five Years of Ensuring Corporate Integ

More than 50 defendants have been charged over the past five years under new securities-fraud provisions, including:

•securities fraud, • insider trading, • market manipulation, • obstruction of justice, • false statements, • stock option backdating, • conspiracy, • money laundering, • wire fraud, and • violations of the Foreign Corrupt Practices Act [which required Internal

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