Veeco's Code Of Ethics Case Summary
♣ Seven months later, the same employee reported more export violations. The Audit Committee allegedly “permitted additional violations to occur, either by completely disregarding the first report, or by establishing procedures that were wholly inadequate and ineffective and that failed to protect the Company from potentially enormous liability” [p. 278].
♣ Responsibilities and the Charter. According to the complaint, Veeco’s Audit Committee is responsible, among other things, for
o “reviewing the scope and results of the audit and other services provided by Veeco’s independent auditors, and overseeing Veeco’s Code of Ethics” [p. 276]. o “Additionally the Audit Committee’s charter sets forth the following responsibilities of the Committee: …show more content…
274 citation omitted]. In other words, the plaintiffs claimed the defendants could not make an impartial decision as to whether to prosecute this action on behalf of the corporation since the defendants would face substantial personal liability if the shareholders were to prevail.
Here, plaintiffs alleged that, “Defendants’ reckless stewardship of Veeco, particularly their failure to institute appropriate controls and oversight of all areas of the Company’s business, has exposed the Company to potentially significant fines and legal liability, has substantially impaired the Company’s market capitalization, has eroded the Company’s goodwill and trust in the market place, and has threatened the Company’s overseas sales” [pp. 274-275].
Outcome. Under Delaware law the plaintiffs had to create a reasonable doubt about the disinterestedness or independence of a majority of the board. The court decided that the shareholder derivative suit could proceed without a demand on the board because the allegations raised a reasonable doubt as to the disinterestedness of six of the ten directors (five members of the Audit Committee plus one board member who was also the CEO).
The court reasoned that the Audit Committee members were interested …show more content…
The case highlights the need to review and reassess the audit committee’s duties, especially considering its existing workload. Plaintiffs also claimed the transfer did not cover all the risk responsibilities from the prior risk committee. In addition, it reveals the need to have in place a process to receive information that may have a significant impact on financial reporting – in this case arising from a defective product. Finally, the case raises the question of corporate culture and the role it plays in the effectiveness of a complaint process in a large multifaceted
♣ Responsibilities and the Charter. According to the complaint, Veeco’s Audit Committee is responsible, among other things, for
o “reviewing the scope and results of the audit and other services provided by Veeco’s independent auditors, and overseeing Veeco’s Code of Ethics” [p. 276]. o “Additionally the Audit Committee’s charter sets forth the following responsibilities of the Committee: …show more content…
274 citation omitted]. In other words, the plaintiffs claimed the defendants could not make an impartial decision as to whether to prosecute this action on behalf of the corporation since the defendants would face substantial personal liability if the shareholders were to prevail.
Here, plaintiffs alleged that, “Defendants’ reckless stewardship of Veeco, particularly their failure to institute appropriate controls and oversight of all areas of the Company’s business, has exposed the Company to potentially significant fines and legal liability, has substantially impaired the Company’s market capitalization, has eroded the Company’s goodwill and trust in the market place, and has threatened the Company’s overseas sales” [pp. 274-275].
Outcome. Under Delaware law the plaintiffs had to create a reasonable doubt about the disinterestedness or independence of a majority of the board. The court decided that the shareholder derivative suit could proceed without a demand on the board because the allegations raised a reasonable doubt as to the disinterestedness of six of the ten directors (five members of the Audit Committee plus one board member who was also the CEO).
The court reasoned that the Audit Committee members were interested …show more content…
The case highlights the need to review and reassess the audit committee’s duties, especially considering its existing workload. Plaintiffs also claimed the transfer did not cover all the risk responsibilities from the prior risk committee. In addition, it reveals the need to have in place a process to receive information that may have a significant impact on financial reporting – in this case arising from a defective product. Finally, the case raises the question of corporate culture and the role it plays in the effectiveness of a complaint process in a large multifaceted