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Corporate Compliance
Introduction
The United States corporate governance system must seem to be in terrible shape. The business press has focused relentlessly on the corporate board and governance failures at Enron, WorldCom, Tyco, Adelphia, Global Crossing, and others. Top executive compensation is also routinely criticized as excessive by the press, academics, and even top Federal Reserve officials. These failures and concerns in turn have served as catalysts for legislative change- in the form of the Sarbanes-Oxley Act of 2002(SOX)- and regulatory change, including new governance guidelines from the NYSE and NASDAQ.
The move toward shareholder value and increased capital market influence has also been apparent in the way corporations have reorganized themselves. For example, there has been a broad trend toward decentralization. Large companies have been working hard to become more nimble and to find ways to offer employees higher-powered incentives. At the same time, external capital markets have taken on a larger role in capital reallocation, as evidenced by the large volume of mergers and divestitures throughout the '90s. The corporate governance structures in place before the 1980s gave the managers of large public U.S. corporations little reason to make shareholder interests their primary focus. Since the mid-1980s, the American style of corporate governance has reinvented itself and the rest of the world seems to be following the U.S. lead. (Sox
One provision requires the CEO and CFO to disgorge any profits from bonuses and stock sales during the 12-month period that follows a financial report that is subseq ...