Ethics Programs, Board Involvement, and Potential Conflicts Of Interest In Corporate Governance

Board composition, insider participa tion on compensation committees, and director compensation practices can potentially cause conflicts of interest between directors and shareholders. If these corporate governance structures result in situations where actions beneficial to directors do not also benefit shareholders, then shareholders may suffer. Corporate ethics programs usually address conflicts of interest that may arise in the firm\u27s activities. Some boards of directors take active roles in their firms\u27 ethics programs by actively overseeing the programs. This paper empirically examines the relationship between ethics programs and potential conflicts of interest and the relationship between board involve ment in a firm\u27s ethics program and potential conflicts of interest. Evidence in this paper shows that firms with ethics programs have a lower percentage of inside directors on their compensation committees than do firms without ethics programs. Firms in which boards are actively involved in the programs have more inde pendent boards (higher percentage of independent directors and lower percentage of inside directors) and are more likely to compensate outside directors with equity than are firms in which boards are not actively involved in the programs. Supplemental analyses show that the incidence of potential conflicts of interest is not significantly different between firms without ethics programs and firms in which boards are not actively involved in the programs. Taken together, the evidence in this paper indicates that a board actively involved in an ethics program, and not the simple Andrew J. Felo is Assistant Professor of Accounting in the Else School of Management at Millsaps College. His papers appear in Research on Accounting Ethics, Decision Support Systems, and Managerial Accounting. existence of an ethics program, is related to the incidence of potential conflicts of interest

Directors\u27 Remuneration in the United States

The recent financial crisis has led to a loss of trust in corporate governance and in particular on remuneration practices and the propensity for these to create excessive risk-taking - particularly in the financial sector. The main objective of this book is to outline recent practical and theoretical issues and examine emerging new approaches towards directors\u27 remuneration in the post-crisis period. Written by an established network of international experts, the book provides new data in both cross-sector and cross-country analyses and therefore provides a unique opportunity to compare results and institutional practices across sectors and nations. The book argues for a correct balance between risk and reward and for Directors\u27 compensation to be equitable to all parties and stakeholders. By examining the current theories, practices and regulations and explaining them in detail it provides a state of the art snapshot of one of the key corporate governance issues of our time. It will be essential reading for graduate students, researchers, lecturers and practitioners in corporate governance and auditing as well as all students in finance, accounting, management and law.https://nsuworks.nova.edu/hcbe_facbooks/1155/thumbnail.jp