CORPORATE GOVERNANCE AND THE
CONTROLLER
By: Stacy Bohne and Mallory Johnson
TOPICS TO COVER:
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Introduction to Corporate Governance
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Issues and Challenges with Corporate Governance
Importance of Corporate Governance
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Fulfillment of internal and external requirements
Code of Ethics
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Key Components
Responsible Parties
Definition
Key Components
Survey Results
Enforcement and Effectiveness of Internal Policies
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Video
Discussion
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WHAT IS CORPORATE GOVERNANCE?
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Definition
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Key Components
1)
2)
3)
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Framework of rules to ensure accountability
Explicit and implicit contracts between firm and
stakeholders
Procedures for reconciling conflicting interests of
stakeholders
Procedures for proper supervision, control, and informationflows
Key is Balance
Responsible Parties


Regulatory Body
Stakeholders
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ISSUES & CHALLENGES WITH CORPORATE
GOVERNANCE
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Issues for companies:
 Provide
incentives for the firm to behave ethically
 Provide transparency to help assure that the firm is
doing the right thing
 Have effective accountability mechanisms if those in
the firm, or representing it, are not acting in the best
interest of the stakeholders

Challenges for companies:
Internal Control Requirements
 Implementation timeframes
 Roles and workloads of members of Board and Audit
Committees
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WHY IS CORPORATE GOVERNANCE IMPORTANT?
Governance surrounds all activities in an
organization
 The independent board of directors is in charge
of making sure that the organizations goals are
being achieved within the parameters of
outlined policies
 Helps achieve organizational goals in an
organized manner and identify risk associated
with those objectives.

BOARD OF DIRECTORS
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Comprised of:

An audit committee
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A compensation committee aligning executive
compensation to shareholder value
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A nominating committee ensuring effective governance
of the board

The board is responsible for authorizing, directing, and
overseeing management toward the achievement of the
organizational objectives.
SECTION 406 OF SOX
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Requires companies to disclose whether or not,
and if not, the reason therefore, the company
has adopted a code of ethics for senior
financial officers, applicable to its principal
financial officer and controller or principal
accounting officer or persons performing
similar functions.
SECTION 406 OF SOX
Just handing out a code of ethics is NOT
enough.
 Requires issuance of code of ethics to be
disclosed in financial reports
 Public companies must have a system in place
to effectively address ethics within their
organization
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WHAT AND WHY?

Definition
A
code of ethics is a set of guidelines which are
designed to set out acceptable behaviors for
members of a particular group, association, or
profession

Purpose
 Each
code of ethics is unique to its specific
organization but should support the mission
statement.
HOW ARE CODES OF ETHICS DERIVED?
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Step 1
 Develop
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a mission statement
Step 2
 Understand
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the risk environment
Step 3
 Summarize
ethics survey results
JUST FOR FUN- CAN YOU GUESS THE COMPANY?

To inspire and nurture the human spirit— one
person, one cup, and one neighborhood at a
time.
 Starbucks

Our mission is to make _______the preferred
shopping destination for our guests by delivering
outstanding value, continuous innovation and an
exceptional guest experience by consistently fulfilling
our Expect More. Pay Less brand promise.
 Target
CODES OF ETHICS
TYPICAL CONTENT
Purpose of Code
 Commitment to strong ethical standards
 Description of ethics hotline
 Fair dealing
 Conduct in the workplace
 Conflicts of Interest
 Company Property and Records
 Complying with the Law
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ENFORCEMENT AND EFFECTIVENESS
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Whistleblower programs
 US
Federal Protection Acts
 Recent Amendments

Management view on ethical practices
 Influencing
an organizational culture
 Broadening scope for Board of Directors?

Education and Training
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VIDEO!!!
http://www.youtube.com/watch?v=f2jcy5y1TWw&feature=relate
d
Stop at 4:39
DISCUSSION – SURVEY RESULTS
Are Code of Ethics effective in ensuring an
organization is ethical?
 What changes would you suggest to manage a
risk environment in an ethical manner?
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REFERENCES
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Corporate Governance. Businessdictionary.com. Retrieved (2009, October 31) from
http://www.businessdictionary.com/definition/corporate-governance.html
Willis Group Holdings. Corporate governance. Retrieved from
http://www.willis.com/Client_Solutions/Services/Corporate_Governance/
Walker, David M. U.S. Government Accountability Office, (2004). Restoring trust after
recent accountability failures. Retrieved from
http://www.gao.gov/cghome/2004/belfast04/img0.html
GAP statements and explanation of whistleblower amendment in stimulus package.
Retrieved from http://www.whistleblower.org/template/page.cfm?page_id=227
Institute of Internal Auditors. Corporate governance: strategies for internal audit.
Retrieved from
http://www.theiia.org/training/index.cfm?act=seminar.detail&semID=153
Tuschman, R., (2007). Internal Auditing. Altamonte Springs: The Institute of Internal
Auditors Research Foundation
Rules of the Game: Do Corporate Codes of Ethics Work?. Retrieved (2009, November
1 ) from
http://www.questia.com/googleScholar.qst;jsessionid=K51bThlQ1wnJyGZ4B5vkBZR
nYRppCrZ6hprjHbTGfjnhnQmf0nyn!1366559283!2066618780?docId=5001501133
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QUESTIONS?
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