Research Paper on Board of Directors & CEOs: Key Players in Ethical Corporate Leadership

Introduction

The board of directors and the chief executive officers are the primary and most basic positions in any company and their leading roles are to make major company decisions, scaling of the company's resources in the right manner, managing the company's overall operations as well as acting as the communicators between the corporate services, the shareholders as well as the employees in the company. They conduct themselves ethically and honestly through ethical handling of the conflicts between workers and shareholders of the company in personal and professional relationships. The chief executive officer operates under the authority of the board of directors, and after the chief executive officers, there is other senior management whose primary role is to maintain the company's reporting (Muttakin, Khan, & Mihret, 2018).

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Through the maintenance of ethics and ethical code of conduct in business helps in the creation of a good relationship between shareholders, suppliers, competitors as well as customers. Its the responsibility of the board of directors to always realize and ensure ethical code, implementation of the right system by the management as well as the recognition of the moral code of conduct by every employee. The board of directors always expect the chief executive officer to offer both the internal and external leadership at the workplace. An effective leader is capable of establishing an ethical environment which demands quality accounting as well as reliable financial reporting for other users. Also, he/she creates certainty and stability (Duska, Duska, & Kury, 2018).

Every business requires an ethical environment since this environment enables forecasting, high-quality accounting as well as reporting to take place. Some of the strategies for the three business areas include the following; those strategies for accounting include timely audit which should be done to ensure that account is kept ethically and appropriately. Every financial transaction should be recorded; every employee in the accounting department should possess enough knowledge and skills on the concepts and principles of accounting. Proper training should be offered to those employees who may not be familiar with a new technology or software in the department.

There should be software in the department which would enable quick saving or recording of the accounting data, and the chief executive officer should check the internal control in the accounting department in an aim to ensure that confidential records are not leaked and the accounting records are not misused. Strategies for reporting include giving employees proper format of reporting to enable standardization of all reports; the chief executive officer should ensure that every department has an adequate hierarchy to ensure that employees have the person to whom they report to. All employees should be well trained and should be familiar with the system, and every task in a given department should be allocated a specific deadline to ensure that employees report it within the deadline period. All these are the responsibilities of the chief executive officer in charge.

The strategies for forecasting include conducting revenue forecasting, cost forecasting, as well as profit forecasting, helps in predicting the company's future performance. The chief executive officer should ensure overhead budget, cost budget, revenue budget as well as sales budget are being made for forecasting future expansion and profits also the budget should be developed to ensure actual results are comparable to the results budgeted and the variance can be identified. The Chief Executive Officer should ensure that strategies and policies made are being adequately executed and make all the above strategies to ensure the business operates and does well.

Investor's concern of expected recognition and forecast of the earnings requires due diligence from the interpretations of the corporate management and many businesses are valued based on the multiple EBITDA which initiates or means Earnings Before Interest, Depreciation, Taxes as well as Amortization. The due diligence on finance enables focusing on the sustainability or quality of the earnings of the company. Generally, post-closing cost structure changes, income and expense, inconsistent application of accounting or under and overstated assets or liabilities are all analyzed to an alteration of historical EBITDA in reflecting on sustainable earnings hence an investor has the ability to understand or interpret the assumptions used by the management for forecast creation (Barth, Landsman, & Lang, 2008)

The audit is one of the tools that an investor can use since it assures that the company's management has given the fair and accurate view of the financial performance of the company and its position through audit procedures and rules. Therefore, for an investor to make a well-informed investment decision, he/she should be able to understand that the audit is not a substitution but a complement of the individually economic and tailored due diligence research of the investment target.

The consequences of a publicly traded company due to lack of quality include the management's failure of selecting the best accounting method within the financial reporting and accounting. The board of directors is usually believed and trusted by the management team which ensures the quality and accuracy of the financial statements of the company as well as the accounting practices. They typically design and implements internal control to prevent relevant details in financial reports. The management team wastes every member's time when it gives weak financial statement a time that could have been put into use in making money (Kaplan, & Atkinson, 2015). Poor financial reporting may result or could lead to the failure of the performance of a new product.

According to the Sarbanes-Oxley Act, to assure quality accounting, the below requirements are crucial. One of the requirements is the creation of a public company oversight board which will be overseeing, disciplining, regulating as well as inspecting accounting firms as they play their roles as auditors of the public companies. It is a requirement that all public companies should disclose and evaluate the effectiveness and efficiency of their internal controls when they are relating to financial reporting also those auditors belonging to these companies should attest to such disclosures. The chief executive officers, as well as the chief financial officer, are required to certify the financial reports given. There should be independence by the auditor in that these companies should exercise the highest level of independence as they conduct the auditing of the financial statements. It is a requirement that all the companies that are listed on the stock exchange to have entirely independent audit committees.

The act requires that employees be protected by the allowance of the corporate fraud whistleblowers to file their complaints within ninety days with OSHA. The law states that such audit companies should ban most of the personal loans to executive directors or even executive officers. The SOX act requires a maximum longer jail sentence as well as significant and enormous fines for the corporate executives who willfully and knowingly mistake financial statements (Schaltegger, & Burritt, 2017). It asks for an enhanced civil and criminal penalties in case of the violation of the securities law, it asks for accelerated reporting of the insider trading as well as additional disclosures. The act also prohibits insider trades particularly during periods of pension fund blackout.

References

Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International accounting standards and accounting quality. Journal of accounting research, 46(3), 467-498. Retrieved from https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1475-679X.2008.00287.x

Duska, R. F., Duska, B. S., & Kury, K. W. (2018). Accounting ethics. Wiley-Blackwell. Retrieved from https://books.google.co.ke/books?hl=en&lr=&id=kJJuDwAAQBAJ&oi=fnd&pg=PP7&dq=accounting&ots=ikhkamPnl2&sig=qEwh1KRFvwNAlV8xlipD7MSkvpY&redir_esc=y#v=onepage&q=accounting&f=false

Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning. Retrieved from http://115.127.115.77:8080/xmlui/handle/123456789/494

Muttakin, M. B., Khan, A., & Mihret, D. G. (2018). The effect of board capital and CEO power on corporate social responsibility disclosures. Journal of Business Ethics, 150(1), 41-56. Retrieved from https://link.springer.com/article/10.1007/s10551-016-3105-y

Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues, concepts and practice. Routledge. Retrieved from https://www.taylorfrancis.com/books/9781351282529