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.
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