Evolution of corporate governance

EVOLUTION OF CORPORATE GOVERNANCE

•                     Corporate Governance Developments in USA Years    Developments

•                     1977  The Foreign Corrupt Practices Act  

•                     1979 US     Securities Exchange Commission    

•                     1985  Treadway commission  

•                     1992  COSO issued Internal Control

•                     2002  Sarbanes - Oxley Act    

•                     The Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010

•                     Provides for specific provisions regarding establishment, maintenance and review of systems of internal control.

Emphasized the need of putting in place a proper control environment, desirability of constituting independent boards and its committees and objective internal audit function. As a consequence, the Committee of Sponsoring Organizations (COSO) took birth.

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued Internal Control - Integrated Framework. It is a framework "to help businesses and other entities assess and enhance their internal control systems".

The Act made fundamental changes in virtually every aspect o f corporate governance in general and auditor independence, conflict of interests, corporate responsibility, enhanced financial disclosures and severe penalties for wilful default by managers and auditors, in particular.

Vote on Executive Pay and Golden Parachutes: Gives shareholders a say on pay with the right to a non-binding (advisory) vote on executive pay and golden parachutes (acquisitions). This gives shareholders a powerful opportunity to hold accountable executives of the companies they own, and a chance to disapprove where they see the kind of misguided incentive schemes that threatened individual companies and in turn the broader economy.