Corporate Compliance Plan

Corporate Compliance Plan

Introduction

The steadily increasing volume of corporate scandals has led to increased attention focused on improving the effectiveness of corporate governance. In addition, corporations face an ever-increasing amount of legislation and industry regulation as each new example of misconduct is addressed with additional legislation and guidance from the industry. For example, the collapse of Enron and WorldCom led to the passage of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) that called for revisions to the U.S. Federal Sentencing Guidelines. The legal and regulatory environment has increased the burden of risk on boards of directors to ensure that their corporations adhere to previously existing and newly implemented laws and regulations. In recent years, directors are being held personally liable for failure to adequately perform their duty to monitor corporations.

In addition, the very existence of a compliance committee, as well as the actions taken by the committee, provides evidence to regulatory authorities, such as the Department of Justice, and to investors, that the corporation takes compliance seriously and is actively taking steps to prevent misconduct from occurring. This paper trail provides protection for a corporation in the event it becomes a target of an investigation. Several governing authorities (including the Department of Justice in its guidelines for the prosecution of corporate offenders) have offered reduced likelihood of prosecution and/or reduced fines in cases where an effective compliance program, including high-level oversight (such as a compliance committee) exists. Given these incentives, it seems prudent for corporations to implement compliance committees.

Indeed, the Treadway Commission's Committee of Sponsoring Organizations (COSO) has just released the Enterprise Risk Management - Integrated Framework, in the hopes of providing a method to effectively identify, assess, and manage corporate risk in Riordan. As mentioned in the Enterprise risk management helps ensure effective reporting and compliance with laws and regulations, and helps avoid damage to the entity's reputation and associated consequences. The COSO Framework can be used not only to ensure financial compliance but also to assure legal compliance as well. Legal compliance is no longer solely the province of corporate counsel. Internal auditors may now also be expected to contribute to designing and implementing legal compliance audits to prevent, detect and eliminate corporate misconduct, thus assisting the corporation in minimizing potential negative consequences associated with it. This renewed and expanded emphasis on corporate compliance may require additional skills and expertise beyond traditional auditor training.

Corporate Governance

When Riordan introduced to business entities, they learn about the concept of a corporation. A corporation is an entity that brings together invested capital from the public with business expertise to manage a company with the ultimate goal of benefiting both the investors and the managers. Along with the benefit of limited liability, a publicly-held corporation creates an environment where one party, the manager, is acting on behalf of another party, the owner or shareholder. The separation between ownership and management gives rise to agency conflict, that is, the interests of the manager (agent) may not necessarily be the same as those ...