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Comparative Corporate Governance - Assignment Example

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Introduction Corporate governance structures differ from one country to another. The United States and the UK both have evolved their corporate governance structures in response to scandals, while developing countries in the Asia have corporate governance structures which are tightly held…
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Comparative Corporate Governance
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Download file to see previous pages Either way, the only time that accountability comes into play is when there is a crisis. In this way, managerial accountability issues are the same across jurisdictions. I. Corporate Governance in the United States Corporate governance and governance arrangements vary widely from country to country, and to illustrate this an in-depth examination will focus upon the UK and the United States. The first thing to understand about the United States’ corporate governance is that it evolved after the Enron and WorldCom scandals of the early 1990s to early 2000s. In order to understand why corporate governance in the UK and the United States evolved, one must under the precipitating factors in their evolutions, and that was the Enron and WorldCom scandals in the late 1990s-early 2000s. Corporate governance was different for the United States in the 1980s, because, during this period, hostile takeovers changed the way that corporations did business. 1 Leveraged buyouts were costly maneuvers, which made managers sensitive to the market price of their firm. This, in turn, led to great risks in inflating the stock prices. This was coupled with widespread deregulation and the rise of CEO pay.2 Since CEO pay was tied to the company’s performance, the CEO had reason to inflate the corporate numbers, because this, in turn, would inflate the salary of the CEO. The tie from the company’s performance to the CEO was further reason for the CEO to obsess about the day to day price of the firm. What this means was that, since the CEO pay was tied to the performance of the company, there was further reason for the CEO to inflate numbers, because it would also inflate his or her salary. Because of this tie from the performance of the company to the CEO pay, the CEO was given further reason to obsess over the day to day price of the firm. Moreover, there was a failure of accounting in catching the Enron and WorldCom debacles.3 Arthur Andersen, the accounting firm behind the Enron scandal, went from being one of the most well-respected professional firms in the world to a shamed company that was not only responsible for the Enron scandal, but securities frauds in Waste Management, Sunbeam, HBOCMcKesson, The Baptist Foundation and Global Crossing as well.4 While the U.S. has also traditionally believed in the power of the free market,5 in the wake of the scandals, the U.S. implemented a series of rules, as codified in the Code of Federal Regulations, by which corporations must abide. Some of these rules involve transparency in the disclosure of executive compensation.6 According to the SEC, all corporations must disclose any remuneration made to the CEO, CFO and the three most highly paid officers.7 The rules apply to the following disclosures: “(1) tabular disclosures regarding executive remuneration and director remuneration;(2) narrative description of other types of remuneration and any information material to an understanding of the tabular information, and (3) a Compensation Discussion and Analysis (“CD&A”)”8 . The way that all companies must disclose this information is through their annual proxy statement, which the SEC's website makes available on-line.9 Additionally, there are other regulations that are designed to increase transparency about executive and director compensation. For instance, there are regulations that require disclosure regarding “(i) beneficial ownership of public company securities by persons owning 5% or more of ...Download file to see next pagesRead More
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