Corporate Governance: Codification or Self-Regulation?

Is SOX a Viable Solution for New Zealand?

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Author: Lars Haverkamp

Publisher: GRIN Verlag

ISBN: 3638861422

Category: Law

Page: 71

View: 9990

Master's Thesis from the year 2006 in the subject Law - Comparative Legal Systems, Comparative Law, grade: B+, University of Canterbury (Law School), 93 entries in the bibliography, language: English, abstract: The stock market has gained extraordinary significance over recent years. Large proportions of society invest in equity markets in order to save for their retirement. Various bodies exist to fight abuses by executives of publicly owned companies. Parliament has created the New Zealand Securities Commission (SEC), an independent Crown entity in terms of the Crown Entities Act 2004, to fight ‘white collar fraud’ and the abuse of business ethics and the law. Numerous scandals worldwide but especially the Enron case in the United States of America (USA) at the beginning of this decade shocked investors and led to a decrease in shareholder confidence. Investors lost their trust in corporate governance techniques and the credibility of managements. In the 1930s, in the aftermath of the 1929 stock exchange crash in the USA, Berle and Means ascertained the underlying problem of corporate governance as the separation of ownership and power. In accordance with Adam Smith, they explained that, as a basic human trait, executives never apply the same diligence when running a company as the owner of the same company might apply. This fundamental understanding is the reason for the necessity of corporate governance rules. As a pro-tection of shareholder interests, the interests of the owners of the company, the regulator tries to set standards which create investor confidence and security. By now the large majority of nations have implemented some form of corporate gov-ernance regime. The US government has tried to counter fraud and investor scepticism by adopting a statutory corporate governance code called the Sarbanes-Oxley Act 2002 (SOX). New Zealand, on the other hand, opted for a more voluntary ap-proach to governance regulation based on principles rather than legal norms, which impose no legal obligation on affected parties. Farrar disapproves of his approach and calls New Zealand’s principles “bland provisions”. He fears a decrease of investments in the New Zealand market if it does not follow the US lead quickly. This paper tries to evaluate Farrar’s proposal of imitating the US example. Section II portrays corporate governance regulations currently in place in New Zealand. It focuses predominantly on listed public companies and shows shortfalls in this area. Section III illuminates SOX and its provisions. The paper provides explanations ma-jor fraud scandals in the USA and discusses in the light of these findings the effectuality of SOX. It concludes that the US legislation has numerous pitfalls and fails to achieve necessary fraud prevention. Based on this understanding, Section IV discusses the advantages and disadvantages of a principle-based approach to corporate governance regulation. It is shown how selfregulation paired with a strong legal framework provides sufficient protection for investors and how such an approach values the theory of free markets. This author believes strongly in the efficiency of free, unregulated markets and eventually concludes with a few humble suggestions on how New Zealand might change their corporate governance regime.

Corporate Governance

Codification Or Self-Regulation?

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Author: Lars Haverkamp

Publisher: GRIN Verlag

ISBN: 3640462696

Category:

Page: 80

View: 3142

Master's Thesis from the year 2006 in the subject Law - Comparative Legal Systems, Comparative Law, grade: B+, University of Canterbury (Law School), 93 entries in the bibliography, language: English, comment: The paper deals with the pros and cons of the US Sarbanes Oxley Act and its adaptability to the New Zealand legal system. The author looks specifically at the two predominant systems of implementing corporate governance codes: the US approach of codification and the rather European based approach of self-regulation. The paper concludes with a recommendation for New Zealand's highly unique market system., abstract: The stock market has gained extraordinary significance over recent years. Large proportions of society invest in equity markets in order to save for their retirement. Various bodies exist to fight abuses by executives of publicly owned companies. Parliament has created the New Zealand Securities Commission (SEC), an independent Crown entity in terms of the Crown Entities Act 2004, to fight 'white collar fraud' and the abuse of business ethics and the law. Numerous scandals worldwide but especially the Enron case in the United States of America (USA) at the beginning of this decade shocked investors and led to a decrease in shareholder confidence. Investors lost their trust in corporate governance techniques and the credibility of managements. In the 1930s, in the aftermath of the 1929 stock exchange crash in the USA, Berle and Means ascertained the underlying problem of corporate governance as the separation of ownership and power. In accordance with Adam Smith, they explained that, as a basic human trait, executives never apply the same diligence when running a company as the owner of the same company might apply. This fundamental understanding is the reason for the necessity of corporate governance rules. As a pro-tection of shareholder interests, the interests of the owners of the company, the regulator tries to set standards which creat

Corporate Governance

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Author: Saleem Sheikh,Rees

Publisher: Cavendish Publishing

ISBN: 1843142619

Category: Business & Economics

Page: 236

View: 2650

This book critically considers the relationship between directors, shareholders and auditors in the corporate governance system. Traditionally, company law has been primarily based on this tripartite relationship. This book comprises a series of contributions from authors who argue that there are wider interests which British company law has largely ignored. These include the interests of creditors, employees, consumers, suppliers and the general public. The concept of corporate governance is examined with comparative references to the USA and Canada. Particular reference is made to the Cadbury Committee and its implications for future company law reform. The ethical and sociological dimensions of corporate governance is also fully discussed

Corporate Governance and Directors' Independence

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Author: Yuan Zhao

Publisher: Kluwer Law International B.V.

ISBN: 9041139419

Category: Business & Economics

Page: 240

View: 9808

More and more, the agenda of corporate governance reform has been calling for a dramatic change in the composition and structure of boards of publicly traded companies, with particular criticism reserved for the role of independent directors. This timely, ground-breaking book takes a new and rigorous approach to this important issue. Investigating board independence from a distinctly original perspective, the author’s systematic analysis explores the effective interaction of such aspects as the following: What specific functions are expected of independent directors? How these functions fit with the unitary board structure? Why independent directors are seen as inherently necessary for corporate governance? Whether board independence can be compatible with other governance mechanisms? How mainstream company law is applied to independent directors. The analysis leads to a series of solutions designed to eliminate the real and perceived obstacles to the proper functioning of independent directors. In the process, the author discusses such critical ‘moments’ in corporate governance as monitoring, public relations, social responsibility, shareholder activism, the danger of ‘groupthink’, remuneration, collective liability, and codes of conduct. The discussion and analysis chart a course through which independent directors can better serve the goal of improving the system of corporate governance. As such, it will be greatly appreciated by investors, corporate counsel for institutional investors, and policymakers and academics in relevant areas of both business and law.

The Federalization of Corporate Governance

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Author: Marc I. Steinberg

Publisher: Oxford University Press

ISBN: 0190876301

Category: Law

Page: 256

View: 2471

This book focuses on the federalization of corporate governance in the United States from both historical and contemporary perspectives. Although the states traditionally have regulated the sphere of corporate governance - encompassing the relations among and between the subject corporation, its directors, its officers, its stockholders, and other stakeholders - federal law today impacts the governance of publicly-traded companies to a greater degree than ever before in U.S. history. This book discusses the evolution and development of corporate governance from a federal law perspective from the commencement of the twentieth century to the present. It examines the tension between state company law and federal law, analyzes the federal historical developments, explains the ramifications of the federal legislation enacted during the past two decades, and recommends corrective measures that should be implemented. The book accordingly provides an original, historical, and contemporary analysis of the federalization of corporate governance - a subject that impacts this country's economic well-being in a very fundamental way.