MGSC14H3 Chapter Notes - Chapter 5: Fiduciary, Good Governance, Whistleblower

261 views3 pages
17 May 2017

For unlimited access to Textbook Notes, a Class+ subscription is required.

Chapter 5 Corporate Ethial Governane &
I. New Accountability and Governance Framework
Sarbanes-Oxley Act (SOX, 2002): mandated strict reforms to improve financial disclosures from publicly-traded
companies and prevent accounting fraud.
Foundation of good governance and accountability: a culture of integrity
Fiduciary duties of BoD:
1. Obedience: avoid committing acts beyond the scope of the powers of a company as defined in its charter or
law of the state of incorporation
2. Loyalty: act in good faith and must not allow his personal interest to prevail over the interests of the co.
3. Due care: to be diligent and prudent in managing the co.’s affais
Paramount duty of BoD: safeguard the interest of shareholders
Corporate shareholder accountability: legally accountable
Corporate stakeholder accountability: strategically accountable, if not legally
Shareholders, employees, customers, suppliers, competitors, lenders and creditors, gov’ts, activists, others (incl.
media) affected or can affect the ahieeets of the o.’s ojeties
II. Corporate Governance
Definition: the oesight, oitoig ad otollig of a opa’s atiities and personnel to ensure support
of the shaeholdes’ iteests, in accordance with laws and the expectations of stakeholders
Stakeholder-accountability oriented governance process (SAOG): incorporating all stakeholder interests into
the o.’s isio, issio, stateg, poliies, odes, paties, opliae ehaiss ad feedak
Elements: Stakeholders, BoD, lawyers, external auditors, internal auditors and accountants, ethics officer (EO,
report to CEO and Audit Committee), whistle-blowers (report to EO or AC)
Organizational values and actions development process
Difficulty: values and priorities differ in different cultures
→ “olutio: hypernorms (universal values): honesty, fairness, compassion, integrity, predictability, responsibility
- Itegit: a fi’s atios should e osistet / its piiples
Effective ethical code of conduct must be:
1. A blend of rules and principles
2. Reinforced by a comprehensive ethical culture
1) Included in training sessions
2) Refeed to i seio aageet’s speehes
3) Accompanied by a reporting mechanism linked to feedback and recognition systems
III. Threats to Good Governance
1. Misunderstanding obj. and fiduciary duty: Employees isudestadig of top gt’s epetatios due to
1) Misguidance of incentive programs
2) Lack of proper guidance/reporting mechanisms
3) Top management not understanding their duty as a fiduciary
Identify, assess, and
rank all stakeholder
Integrate into
value system
Corporate motivation
E.g. merits and rewards Actions
find more resources at
find more resources at
Unlock document

This preview shows page 1 of the document.
Unlock all 3 pages and 3 million more documents.

Already have an account? Log in

Get access

$10 USD/m
Billed $120 USD annually
Homework Help
Class Notes
Textbook Notes
40 Verified Answers
Study Guides
1 Booster Class
$8 USD/m
Billed $96 USD annually
Homework Help
Class Notes
Textbook Notes
30 Verified Answers
Study Guides
1 Booster Class