Effective Nov. 1, as a direct result of Sarbanes-Oxley’s mandate to the U.S. Sentencing Commission, public company directors and senior executives will assume significantly greater responsibilities to ensure the existence of effective corporate compliance and ethics programs. The amended guidelines essentially set forth two overarching requirements: first, that corporate officers and directors exercise due diligence […]
Harvey L. Pitt
Posted inFrom the Archive
The Changing Landscape Of Internal Corporate Investigations
Although the spectacular, seemingly daily, announcements of multi-billion dollar global corporate implosions is now—hopefully—behind us, each day’s press still brings news of companies under government investigation. Indeed, the SEC opened nearly 700 investigations this past year, an all-time record. More and more frequently, companies finding themselves in the government’s cross-hairs announce the onset of the […]
Posted inBoards & Shareholders
Practical Guidance On Being Worth One’s “Salt”
The late President Reagan articulated the hope that “people on Wall Street would pay attention to people on Main Street.” This optative was sage when uttered, and remains so even after so many years have passed. And nowhere is this truer than in the area of executive compensation, where Wall Street is learning—sometimes painfully—to understand […]
Posted inInternal Controls
Risky Business: Assessing And Managing Risk
Management’s most important job is identifying, assessing and managing risk; how well it’s perceived to perform this role is often reflected in a company’s share prices. After shocking corporate defalcations, high-profile prosecutions, Sarbanes-Oxley’s passage and dozens of new regulatory requirements, focus on risk management has become clouded and diffused. This, in turn, often means management […]
Posted inFrom the Archive
The Critical Importance, and Changing Face, of Corporate Transparency
With so much current emphasis on popular buzz words, it’s easy for companies and investors to lose sight of exactly what’s meant when reference is made to “corporate governance.” For too many, the concept conjures up questions about the appropriate number of independent directors, the nature of various corporate committees, and the timing of shareholder […]
Posted inBoards & Shareholders
Directorial Activism In The Face Of Alleged Or Actual Officer Misbehavior
Ffor at least a century, the role of non-management corporate directors was often treated as one of passivity, not activism. Power to manage a corporation’s affairs was believed to reside exclusively in the hands of its senior officers, with the proper role of outside directors being generically and non-intrusively to oversee, and approve (when asked […]
Posted inAccounting & Auditing
Certifying Internal Controls — A Trap for the Unwary?
A great deal of frenzy currently surrounds the Sarbanes-Oxley requirement that public companies assess, and their outside auditors attest to, the effectiveness of the company’s internal controls. To paraphrase Epicetus, “[w]hat concerns me is not the way things are, but rather the way people think things are.” Most companies seem to be adopting one of […]
Posted inBoards & Shareholders
New Year’s Resolutions For Independent Directors
The last three years have seen an exponential increase in corporate implosions. The defalcations at Enron, WorldCom, HealthSouth, Ahold, Parmalat and countless other global companies have produced: Stringent new legislation, in the form of Sarbanes-Oxley; A plethora of new rules and regulatory requirements from the SEC, the NYSE and Nasdaq; […]
Posted inFrom the Archive
The Coming Storm: Mandatory Expensing of Stock Options
In 1995, FASB required corporations either to expense stock options at the time of grant, reflecting their estimated fair value directly in their income statements, or to disclose the pro forma impact of expensing options in a financial statement footnote. Typical stock option plans that establish the number of shares and exercise price at the […]
Posted inFrom the Archive
Dealing with Employee Complaints
With so much emphasis on corporate wrongdoing filling newspapers, it’s no surprise that corporate employees, shareholders, customers, competitors and suppliers are more sensitive to indications of possible wrongdoing. While these complainants may turn out to be mistaken, or perhaps even misguided, on occasion, it hasn’t escaped the attention of regulators, prosecutors and the press that […]