GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT AND INTERNAL CONTROL CHAPTER 2 Corporate Governance: What is a Well-governed Organization?
2022 04-MT-00037-0 978-621-04-3689-1 BS Business Administration Learning Objectives ....................................................................................................... 17 Introduction ................................................................................................................... 17 At the Outset: What is a Well-governed Organization? ................................................. 18 Sarbanes-Oxley Act (SOX Law): A “Rules-based” Corporate Governance Regulation.... 19 OECD Principles of Corporate Governance .................................................................... 23 Functions of the Board of Directors .............................................................................. 24 Corporate Governance-related Provisions of the Revised Corporation Code ............... 25 Revised SEC Code of Corporate Governance for Publicly-Listed Companies: A “Comply or Explain” Approach ................................................................................... 26 Governance of Related Party Transactions.................................................................... 31 Governance of Executive Compensation ....................................................................... 32 Guide Questions ............................................................................................................ 33 Activity 1: Class Debate ................................................................................................. 34 Activity 2: Internet Assignment ..................................................................................... 34 Activity 3: Governance of Liquidity During Pandemic Times ......................................... 35 Definition of Terms ........................................................................................................ 36
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CONTENTS
CONTENTS
CHAPTER 3 Applying Ethics in Business
Preface ......................................................................................................................... ix
CHAPTER 1 Introduction to Corporate Governance Learning Objectives ....................................................................................................... 1 Introduction ................................................................................................................... 1 Case Analysis: “The Fall of Enron” ................................................................................. 2 Definition of Terms ........................................................................................................ 4 The Need for Corporate Governance: Sarbanes-Oxley Act ........................................... 6 Definition of Corporate Governance ............................................................................. 8 Concept of “Stewardship” and “Control” ...................................................................... 8 Fulfillment of Long-term Obligations............................................................................. 9 Stockholder Theory and Stakeholder Theory ................................................................ 10 Long-term Sustainability Goal of Governance ............................................................... 10 The Agency Problem...................................................................................................... 11 Difference Between Governance and Management ..................................................... 12 Board Independence ..................................................................................................... 12 Board Setups ................................................................................................................. 13 Guide Questions ............................................................................................................ 14 Activity 1: Class Debate ................................................................................................. 14 Activity 2: Causes of Corporate Failures ........................................................................ 14 Activity 3: Analyzing the Effects of the WorldCom Accounting Fraud ........................... 15
iv Difference between Illegal Acts and Unethical Acts...................................................... 44 Communication of the Code of Ethical Conduct............................................................ 45 Unethical Acts in the Various Departments of the Company ........................................ 45 The Company’s Code of Ethical Conduct ....................................................................... 46 Resolution of Ethical Issues in the Field of Accounting .................................................. 48 Guide Questions ............................................................................................................ 50 Activity 1: To Record or Not? ......................................................................................... 50 Activity 2: Is this Ethical? ............................................................................................... 50 Activity 3: Internet Assignment: Enron’s Code of Ethics ............................................... 51 Definition of Terms ........................................................................................................ 52 Learning Objectives ....................................................................................................... 39 Introduction ................................................................................................................... 39 Ethics in General ............................................................................................................ 40 Corporate Social Responsibility ..................................................................................... 41 Definition and Nature of Business Ethics....................................................................... 42
CHAPTER 4 Introduction to Risk Management: “What Can Go Wrong?”
Learning Objectives ....................................................................................................... 55 Introduction ................................................................................................................... 55 Definition and Nature of Risk ........................................................................................ 56 Types of Risk .................................................................................................................. 58 Definition and Nature of Risk Management .................................................................. 62 Risk Appetite ................................................................................................................. 63 Steps in the Risk Management Process ......................................................................... 64 Risk Management Frameworks ..................................................................................... 67 Guide Questions ............................................................................................................ 68 Activity 1 (Group Work): Identifying Business Objective and Risks ............................... 69 Activity 2 (Group Work): Risks and Management Action Plans ..................................... 69 Activity 3: Internet Assignment: Top Global Risks ......................................................... 70 Definition of Terms ........................................................................................................ 71
CHAPTER 2 Corporate Governance: What is a Well-governed Organization?
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Learning Objectives ....................................................................................................... 17 Introduction ................................................................................................................... 17 At the Outset: What is a Well-governed Organization? ................................................. 18 Sarbanes-Oxley Act (SOX Law): A “Rules-based” Corporate Governance Regulation.... 19 OECD Principles of Corporate Governance .................................................................... 23 Functions of the Board of Directors .............................................................................. 24 Corporate Governance-related Provisions of the Revised Corporation Code ............... 25 Revised SEC Code of Corporate Governance for Publicly-Listed Companies: A “Comply or Explain” Approach ................................................................................... 26 Governance of Related Party Transactions.................................................................... 31 Governance of Executive Compensation ....................................................................... 32 Guide Questions ............................................................................................................ 33 Activity 1: Class Debate ................................................................................................. 34 Activity 2: Internet Assignment ..................................................................................... 34 Activity 3: Governance of Liquidity During Pandemic Times ......................................... 35 Definition of Terms ........................................................................................................ 36
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CHAPTER 3 Applying Ethics in Business
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Learning Objectives ....................................................................................................... 39 Introduction ................................................................................................................... 39 Ethics in General ............................................................................................................ 40
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