Corporate Governance and Ethics

Preface

Ineffective corporate governance at the two biggest bankrupt companies in U.S. history (Enron and WorldCom) created incentives and opportunities for earnings management, fraudulent financial reporting, and an unethical corporate culture in which these and other companies (Adelphia, Waste Management, Tyco) failed. Failure of these high-profile companies, which resulted in the loss of hundreds of billions of dollars to investors, paved the way for recent corporate governance reforms, including the Sarbanes-Oxley Act of 2002 (SOX), U.S. Securities and Exchange Commission (SEC) rules, listing standards, and best practices. Corporate governance and business ethics are regarded as the most influential theme of the twenty-first century, having transformed from a compliance requirement to a strategic business imperative and ethical corporate culture. Colleges and universities play an important role in training competent and ethical future academic and business leaders. In today's global business environment, with volatile worldwide capital markets and eroded investor confidence in corporate accountability, the demand for effective corporate governance and ethical conduct in ensuring reliable financial information is higher than ever before.

Effective corporate governance assists management in better running its organization; promotes a vigilant oversight function by the board of directors; encourages shareholders to take an active role in monitoring their organizations; promotes ...