AE10-GOV (Chapter2) - Vibas

MARK ANGELO VIBAS
BSAIS 2
AE10-GOV
CHAPTER 2
GUIDE QUESTIONS.
1. Why did the SOX Act include in its provisions management and auditor's assessments of internal control over the
financial reporting process?
2. What is the role of the board when it comes to the crafting of the company's corporate strategy? With respect to such
a role (in the sphere of corporate strategy), what special skills, knowledge, or qualifications must a board member
possess?
3. Why should project proposals be evaluated first? In the evaluation of projects, what special skills and/or knowledge
must a board member possess to accomplish his/her duty?
4. The absence of lack of corporate governance in the case of a company with a public accountability (e.g., bank, listed
company, pre-need, insurance company) is a more serious problem as compared to the lack of corporate governance in
the case of a small business. Explain this further.
5. Why is the SEC Code of Corporate Governance for Publicly-Listed Companies categorized as a "comply or explain"
approach to regulating corporate governance practices of companies? Do you agree with the SEC in adapting the
"comply or explain" approach rather than "rules-based" or "comply" approach? Cite your reasons.
6. What is the primary duty of a compliance officer? Is the compliance officer directly responsible for complying with all
laws, rules, and regulations?
7. What is the purpose of reviewing related party transactions (RPT)? How does the board contribute to the prevention
of abuses in pricing on transactions with related parties?
8. In your opinion, is it wise to use as basis in determining management bonuses accrual based revenue and profit? How
about actual cash collections/cash flows? Stock price of the company?
ANSWERS:
1. I think the purpose of SOX's required internal control reviews was to increase investor trust and hold CEOs
responsible. Financial reporting is strengthened by risk identification and mitigation, in line with continuous
improvement and other good governance principles. Organizations with sound governance can make use of
current structures to ensure compliance and demonstrate their dedication to openness. Although intricate, the
advantages surpass the disadvantages.
2. Well-run businesses have a board that advises and approves the company's strategic direction rather than
creating it entirely. They question presumptions, offer a variety of viewpoints, and hold management
responsible. Industry expertise, financial literacy, strategic thinking, and risk assessment abilities are qualities
of the ideal board member.
3. Because evaluating projects first ensures they align with strategy, optimize resources, and minimize risks.
Effective board members need industry knowledge, financial literacy, critical thinking, and risk assessment
skills to make informed decisions driving organizational success.
4. In my opinion, publicly traded companies have a greater duty to maintain sound governance. It's not only
about keeping themselves secure; it's also about protecting those who depend on them and preserving faith in
the system as a whole
5. In my opinion, the Sec code strikes a compromise between freedom and accountability by allowing
businesses some flexibility while also requiring a justification for non-compliance. The SEC regulation gives
companies latitude in governance, but it also requires them to justify any deviations from the
recommendations. Although it encourages openness and ethical behavior, this could result in inconsistent
results. To me, the optimal strategy depends on the circumstances.
6. My research indicates that the compliance officer's main responsibility is to create, carry out, and supervise a
compliance program to make sure the company complies with to pertinent internal policies, rules, and laws.
They serve as guardians rather than intimate confidantes. Although they mentor and instruct staff members,
everyone is ultimately responsible for their own compliance.
7. In good governance, reviewing related party dealings (RPTs) helps avoid conflicts and unfair pricing. The
board takes the lead by establishing guidelines, examining important transactions, and requesting
explanations for odd terminology. This encourages accountability, equity, and openness in decision-making.
8. Accruals run the danger of being overstated, and cash flow measures can miss unrealized profits.
Furthermore, stock prices represent performance in conjunction with market mood. Balanced measures are
used in effective governance, including adjusted accruals, cash collections, and non-monetary metrics.
ACTIVITY 1 : (CLASS DEBATE)
For the proponent of "comply" approach:

Merits Of The “Comply” Approach Demerits Of The “Comply or explain”
Approach
1.Complex rules can be open to misinterpretation and 1.No risk of misinterpreting clear rules.
inconsistent application. No risk of misinterpreting clear
rules.
2.Potential for regulatory capture, rules influenced by 2.Reduced compliance costs compared to overly
industry lobbying, favoring specific players. prescriptive rules.
3.Limited room for tailoring practices to specific needs 3.Rigid rules might stifle innovation and adaptability,
and industry best practices. especially for smaller or fastermoving companies.
4.Clear rules reassure investors of minimum governance 4.Risk of inconsistency and greenwashing can erode
standards, potentially boosting investment. investor confidence.
5.Clear rules are easier to enforce, stronger deterrence 5.Limited enforcement, enforcing explanations can be
against non-compliance. nuanced and less impactful.
6.All companies meet the same standards, prevents 6.Potential for greenwashing, companies can "explain
unfair advantages for non-compliant companies. away" without improvement.
7.Clear rules, easy to understand and enforce, consistent 7.Lack of uniformity, different interpretations and
application across companies. applications, difficult comparisons.
For the proponent of “Comply and Explain” approach:

Merits Of The “Comply or Explain” Approach Demerits Of The “Comply” Approach
1.Risk of inconsistency and greenwashing can erode 1.Clear rules reassure investors of a minimum level of
investor confidence in the effectiveness of corporate governance standards across companies, potentially
governance practices. boosting investment
2.Potential for greenwashing, companies can "explain 2.All companies meet the same standards, preventing
away" non-compliance without improvement, creating an unfair advantages for noncompliant companies.
unfair advantage over compliant companies.
3.Lack of uniformity, different interpretations and 3.Clear rules are easier to understand and enforce,
applications, making comparisons between companies leading to consistent application across companies.
difficult.
4.Public rationale for practices potentially attracts 4.Risk of focusing on explaining away noncompliance
investors and promotes trust, encouraging good instead of genuine improvement in governance practices.
governance beyond minimum standards.
5.Companies must disclose deviations from principles, 5.Limited transparency as deviations from principles
increasing investor awareness and promoting might not be disclosed, reducing accountability and
accountability. investor confidence.
6.Avoids unnecessary compliance costs associated with 6.Complex rules can be costly and timeconsuming to
overly prescriptive rules. implement and enforce, creating a significant
administrative burden.
7.Companies can tailor practices to specific needs and 7.Limited room for tailoring practices, potentially stifling
industry best practices, fostering innovation and innovation and growth, especially for smaller or faster-
adaptability. moving companies.
ACTIVITY 2.
CHAPTER 2. ACTIVITY 2: INTERNET ASSIGNMENT
ANSWER:
It is true that all firms, businesses, and organizations must strictly comply to the corporate governance guidelines
established by the Securities and Exchange Commission (SEC). By facilitating efficient, enterprising, and cautious
management, these rules seek to secure the company's long-term prosperity. Adhering to these SEC standards can
help businesses reduce the likelihood of corporate disasters and improve investor trust, which eventually helps to
maintain the financial markets' sustainability and stability.
ACTIVITY 3: GOVERNANCE OF LIQUIDITY DURING PANDEMIC TIMES
SPECIFIC ACTION PERSON RESPONSIBLE EFFECT ON CASH

BALANCE
1.Renegotiate loan terms with 1.Finance department 1.Increase: May secure lower interest
lenders. rates, longer repayment periods, or
additional credit lines.
2.Partner with other businesses for 2.Business development team. 2.Increase: Creates shared resources
joint ventures or strategic alliances. and revenue streams, potentially
improving cash flow.
3.Secure bridge financing from 3.Finance department. 3.Increase: Raises additional capital
investors. through external sources but may
involve debt or equity dilution
4.Negotiate extended payment terms 4.Procurement department. 4.Increase: Delays outflow of cash,
with suppliers. extending runway for payments.
5.Liquidate short-term investments 5.Treasury department. 5.Increase: Converts non-liquid assets
and withdraw short-term deposits. into readily available cash.

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MARK ANGELO VIBAS

ACTIVITY 1 : (CLASS DEBATE)

For the proponent of "comply" approach:

For the proponent of “Comply and Explain” approach:

ACTIVITY 3: GOVERNANCE OF LIQUIDITY DURING PANDEMIC TIMES

SPECIFIC ACTION PERSON RESPONSIBLE EFFECT ON CASH

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