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Referensi Chapter 13
Referensi Chapter 13
Year : 2013-2014
Chapter 13:
Corporate Governance
and Boards of Directors
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.4
Board of directors
Shareholders, who typically own a portfolio of firms, delegate
their authority for internal control to a board of directors.
» The board is given ultimate control over management.
» It monitors and approves management decisions, and
chooses, dismisses, and rewards managers.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.5
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.6
– Board independence
– Interlocking directorates
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.7
– Board competence
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.8
Audit committees
Audit committees provide independent oversight
over companies’ financial reporting processes,
internal controls, and independent auditors.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.9
Compensation committees
Compensation committees deal with issues related to the
compensation and benefits provided to employees, and
particularly top executives.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.10
Corporate governance
The sets of mechanisms and processes that help
ensure that companies are directed and managed
to create value for their owners while concurrently
fulfilling responsibilities to other stakeholders
(e.g. employees, suppliers, society at large).
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.11
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.12
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.13
Prevalence
Primarily because of the major business scandals
that were uncovered in the early 2000s, including
Enron, WorldCom, Tyco, Parmalat, and Royal Ahold,
and other abuses, such as stock option back-dating,
interest in corporate governance has skyrocketed.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.14
Sarbanes-Oxley Act
To improve the transparency, timeliness, and quality
of financial reporting.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.15
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.16
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.17
Section 404
But perhaps the most significant, and most
expensive, provision in the Act is the internal control-
related section of the Act, “Section 404”.
Prior to Sarbanes-Oxley, good internal controls were
said to be good business practice.
– Not only did good controls help ensure fair and accurate
financial reporting, they helped ensure that managers would
have good information with which to make their business
decisions and they helped reduce the incidence of fraud and
asset loss.
– Sarbanes-Oxley made good internal controls a legal
requirement, at least for companies publicly traded in
the U.S..
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.18
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.19
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 13.20
Effectiveness?
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007