Regulatory Compliance as Corporate Responsibility

There are several good examples of major corporate meltdown that scandalized the world prior to the establishment of corporate governance. Nevertheless, since several corporate scandals have made the news, corporate governance has brought about more focus amongst regulators and all stakeholders the world over specifically stakeholders, banks and major authorities. This apprehension has directed in the concentration on the association between an enterprise's stakeholders and its Board of directors, as well as the executive and non--‐executive directors.

Considered as leadership in the corporate landscape, corporate governance is meant to support enterprises in managing opportunities and preventing risk exposure within the organization.

With reference to its common definition, corporate governance requires that it be more realistic in its implementations making sure that the enterprise measure up to legalities and regulatory processes.

The corporate governance workflow stipulates the allocation of accountabilities and roles among different contributors in the organization, such as, the board, managers, stakeholders and other members, and lays out the policies and processes for making decisions on business operational activities.

This is typically not the rule. Some companies’ downfall is the result of their undue exposure to risks, conflicting interest and inadequate accountability on the part of its directors, does not seem to have scared other enterprises. Current problems in businesses are not anything to write home about. Corporate governance is intended to govern and not to be implemented as searching for wrongdoings. On the other hand, the way things are done in the boardroom, corporate governance requires strengthening so it can produce the optimum results so much needed at this time.

When stakeholders corroborate that the organizational accountabilities meet the requirements of regulatory policies, they become accountable to the entire organization and are responsible for maintaining their assets and other investments and hence taking practicable actions for the deterrence of fraud and other irregularities.

Some organizations’ demeanor designated that its directors were not really observing regulatory standards. So far, there is growing recognition that in spite of legal duties remaining solely to stakeholders, there is the view for enterprises to be more accountable to other stakeholders including employees.

Even supposing this observation is being contested, stakeholders still want to wield more authority to preserve their investment. This is proof in the recent demonstrations by stakeholders calling directors various names.

Considering the pertinent standards missed by some corporations in their operations in comparison with others, it is refuting the fact that some of the infractions made are still going on in some enterprises around the world—redundant business investments; pay--‐for--‐performance remuneration packages as well as stock options to key persons with the non--‐executive directors sitting detached doing nothing.

Some companies and their boards remuneration committee decline to throw any question about the level of compensation, perks, annuities, life insurance and incentives to the executive members at crucial points in the business operations. Such other recent pension saga is a recent case in point leaving a bad reputation for involved stakeholders seeing that regular things can be done to reclaim big losses or scandals as obviously overlooked due to fluency which rear disdain.

The appeal of being swayed with money is so glaring that the concept of independent executive directors seating on the board is not having the change it was expected to have as they all easily get bogged down in the problems in the long term. All the so--‐called independent groups, directors, and auditors were there to bring checks and balances yet they failed stakeholders.

People thought and did what they want without regard for ethics. In other words that the burden of the problem is that the culture of the organization should be associated with individual values and directed to what the enterprise is expected to do in its corporate responsibilities and accountabilities. This could without a doubt go a long way to eradicate the culprits from the corporate boardrooms.

Some firms developed partnerships with shell companies or subsidiaries known as distinctive project entities, allowing them to maintain a significant amount of funding in debt off its books, overstate and understate debt due to some very loose accounting standards. The board directors in contrast fulfilled regulatory laws necessitating them to document accounts for each financial period that give actual and impartial assessment of the state of affairs of the organization and of the earnings or risk exposure for that time.

Plenty must have been said and written about this but it is worth noting that reviewers who are meant to evaluate the system, and for that matter the key personnel, have been prone to human error. They have a sense for right and wrong and so an external body could be said to also track their activities and the process goes on and on but what is actually necessary is integrity and morals.

The audit review committee evaluates the risk administration procedure and relevant risk exposures are submitted to the board for assessment, checks financial documentation and restructures the accounting policies relating thereto.

It must be noted that specifically, major accounting problems of a subjective kind are reviewed by the committee thus targeting and tackling the problems significant to the company and not just a regulatory compliance requirement. This process might have supported the status in the long run and could unquestionably support other organizations if they implement those standards.

In addition, the primary general rule of investing, which was diversification was also violated at some companies. Employees committing pension funds in corporate stocks had their savings linked in the stock; and there was no plan for employees to extend those savings and authoritative regulators were left dumbfounded. This is inconsistency on the part of the stakeholders. Employees’ resentment was apparent, for instance some corporate representatives were held captive.

People are considered a key asset to the enterprise. The board has, as a result, developed and implemented procedures aimed at isolating risks in the operations to make sure that they do not affect employees, customers or the general public, all of whose stake are considered as crucial to enterprise growth and success.

Stakeholders have a chance to throw questions or represent their viewpoints at the meeting, which is always the custom. Not all the errors and ambiguity could be blocked promptly but connections should as accustomed be a two--‐way process, continuous and all concerns by stakeholders should be considered and assessed by independent bodies.

The company and its executives have contributed huge amounts of funding to some external parties. It created a sophistication in which investment opportunities were tailored to convert profits into losses and taxes into tax shields. Unwarranted risk was the problem. Other companies though, conduct a weekly meeting which appraises the productivity and progress of the company through its different production centers.

All business facets of risk administration in consideration of the business including sales, infrastructure, product, systems, warehousing and personnel also assessed. Key productivity factors are tracked regularly and periodically to aid in keeping in balance all aspects of risk exposure. Risk administration was part of corporate culture. The board is accountable to the risk management procedure. It has endorsed accountability for execution of the risk administration procedure to the management team comprising of those best qualified in each area of the operations. The board sets leadership on the various degree of risk exposure.

The manner or maneuvers in the boardroom should be followed. Corporate governance should be an unremitting procedure and focused on stakeholder value. It should not classify and should be thoroughly evaluated by an external body outsourced by stakeholders in coordination with the board so that they do not take over the accountabilities of the board.

The board is careful not to distribute documentation of a stock price susceptible nature, which is not accessible to the market as a whole. Alternatively, stock productivity remuneration contributed to some other’s downfall by pushing the executives to state non--‐existent earnings through the external entities to mislead the market in order to keep its stock ratings comparatively higher to enable them to gain higher remuneration. They got paid with big compensation packages as a result.

This process is still continuing all over the world and was chiefly function of the recent economic woes. Without a doubt the boards of organizations should be made to comply with their accountabilities. With corporate governance, one could see that the major contributions lie with the board. For instance, the system of internal reviews and major policy directions as well as the risk administration are the mandate of the board; who in turn endorses these accountabilities to top management best qualified in each area of the business operations.

The board recognized that its major contribution is to frontline and support the interests of stakeholders; is accountable to stakeholders for the productivity and operations and communicates with its stakeholders in consideration of the business activities through its annual documentation and accounts, periodic announcements and regular transaction updates to the stock exchange.

The board of directors was busy attempting to deceive tax regulators in order to collect huge sums of money from creating tax shields. The company could have prevented all those problems if it had considered, implemented and observed the rules to the letter instead of stretching them to suit their whims and impulses. The business highlighted that in sharing information with stakeholders and investors, organizations should think about in no way misrepresenting stakeholders about the corporation's operations or financial situation. This was the need to observe business ethics.

The enterprise looks to be a disaster waiting to happen. The company’s internal reviews had been very poor in reality. When an employee wrote a memo about the top management, the matter was handled internally by appointing a litigation firm, which has a long connection with the company to assess the situation. Auditors, lawyers and independent directors should be looked to be completely independent as outlined in the relevant regulatory compliance laws. They should not be permitted to experiment in the company's business activities where they have any interest, which is to be implemented.

The message to take note from these companies’ experience is there was no regulatory compliance at all with the operations. Enforcement does not automatically translate there would be submission. Enforcement paves the way to compliance and could be associated with the success of corporate governance. Corporate governance is enforcing to require people to correspond to law and regulatory compliance.

Regrettably, this had not been the resolution in most of the corporate failure cases. Nobody seemed to observe the laws and regulatory policies. The importance of this is that compliance to laws and regulations does not come easily without independent directors restricting themselves to follow the thorough audit review of risk administration problems for the specific organization.

Nonetheless, corporate governance could be the center to the character of the enterprise and its directors apart from other equally significant problems like corporate social responsibility for the reason that it has extensively been considered for its obvious economic fitness of organizations and the community in general. Corporate governance should be implemented across departments, teams, and groups, focused on stakeholder value and assessed. The scoring should be reviewed periodically, which could benefit all stakeholders and bring back the trust stakeholders in particular have lost in the management team.

For more information, please contact the Cross-Border Mergers & Acquisitions Division.