Sarbanes-Oxley Act 2002 Analysis
In response to the growing incidents of fraud and to improve the investors' confidence and also to rein in the excessive freedom of management which resulted in the corporate scandals, USA passed a new act, called Sarbanes-Oxley Act 2002. The objective of the act was to bring more reliability and accuracy to corporate disclosures. The new Act required the chief executive(CEO) and financial officers(CFO) to certify the quarterly and annual reports of the company and this made them more accountable and answerable to the shareholders in case of this kind of vulnerable frauds and deceptive accounting reporting in the part of the management. During the same period, different committees are formed in India too, to have regulatory improvisation in the area of corporate governance. In 2005, based on the report of one such committee, i.e., Kumar Managalam Birla Committee, Security Board Exchange of India(SEBI) came out with clause 49 of the Listing Agreement which spelt out various mandatory and voluntary disclosure provisions for the company. Now all the companies are required to submit a quarterly compliance report to stock exchange in the prescribed format duly certified by the CEO and CFO of the respective company. The clause also requires that there should be separate section on corporate governance in the annual report with a detailed compliance report. As per this clause, for a company with an Executive chairman requires it's board to be consisting of fifty percent of independent directors, and a company with a non-executive chairman, at least one-third of the board members to be
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But the understanding of corporate governance is not very clear therefore we need to go through some of the important definitions of corporate governance given by few of the reputed committees and regulatory
But the understanding of corporate governance is not very clear therefore we need to go through some of the important definitions of corporate governance given by few of the reputed committees and regulatory