- How does the passing of the Sarbanes-Oxley Act affect shareholders, directors, and officers of a corporation? Provide a specific example and support your answer with reference to the act.
Signed into law on the 30th day of July the year 2002, the Sarbanes-Oxley Act mainly concerns itself with transparency and accountability in publicly traded organizations. Apparently, the law bill was signed into full effective law by President Bush, amid cries from shareholders regarding the high rates of fraud and irregularities in public corporations. The law affects the directors in many ways that cannot be particularly classified as negative or positive. To the shareholder, the effects are positive in all respects. The first way the passing of the law affected the shareholders positively in the sense that it boosted their confidence in the decisions and information given by the directors and senior officers of the organization (Schaffer 2007). The effect on the directors and the officers was such that they had to be extremely keen on all their decisions and extremely transparent in the manner in which they handled information as they would be held answerable and liable for any misrepresentation. The external auditors were empowered by the act, to ensure that the senior managers handled corporate governance well. For example, the audit manager could be held answerable for a wrong audit report.
- Based on the business that you are currently employed at, discuss the applicable regulatory compliance requirements for a business situation that you have experienced. You may also consider a situation you are familiar with or one that you have researched.
The Sarbanes-Oxley Act is one regulatory compliance requirement that I am familiar with for various business situations at the Dell Corporation. The Act, commonly referred to as SOX, governs such business situations as financial reporting which determines such important things as taxation. The Act lays controls on how such reporting in public corporations is to be done professionally, with confidentiality being upheld at all times. SOX concerns itself with such things as zero alteration of information and data by unauthorized parties, no access to records by unauthorized individuals, and the availability of data when needed by the authorized parties (Schaffer 2007).
Among the Board-governed organizations I am familiar with is the Virgin Atlantic Corporation. At Virgin Atlantic, the board of directors has liabilities, as a board and at individual level. Apparently, much like all managerial position holders, I would be judged with various liabilities as a board member. Among the most prominent liabilities would be the liability of duty of care. As a board member, one owes a duty of care and due diligence to the organization’s shareholders and other stakeholders. Similarly, one would be liable for subordinating organizational interest to individual interest (Schaffer 2007). This may take the form of intermingling personal assets with organizational assets. Another common liability that one would be charged with is the oversight liability. Such liability would arise in the event that misappropriation of funds takes place. To minimize such liability, I would endeavor to adhere to all the laws and regulation relating to every decision I make. Additionally, I would ensure full compliance with government requirements and statutory obligations.
- What special problems arise regarding property rights when an organization decides to do business outside the United States? Identify at least three problems, and then select one and discuss the problem in depth. Identify the alternatives available for resolving the problem, and address the best solution.
There are many problems relating to property rights such as copyrights and patents when a business is trading outside the United States. Among the primary problems is the challenge of counterfeit products. Such organizations as Dell face serious problems in foreign markets where counterfeit products, especially those from China have flooded the market. In such markets, the counterfeits compromise the functionality of property law. Another problem would be that of the duration for which the patents and copyrights would remain valid under the business law of the alien country. Thirdly, the renewal of the patents could be quite costly in a foreign jurisdiction considering that the patents were issued under US law (Schaffer 2007). In a bid to protect property under the law of the foreign land, an organization would endeavor to use such tools as electronic chips to differentiate authentic products from the counterfeits. Secondly, the organization would, through its advertisements educate the consumers on how to spot the difference. Market research would be an appropriate way of pointing out the extent to which an organization’s products are identified and differentiated from fakes.
- What are some of the laws that protect the U.S. business with their international transactions? Select one of the laws and discuss its implication to your business or a business that you are familiar with. Provide support for your answer.
There are laws with extraterritorial application, aimed at protecting the interests of US businesses against the risks associated with exposure to foreign conditions and inconsistencies. Among the most prominent of such laws is the Foreign Sovereign Immunities Act (FSIA). The Act, signed into law by President Gerald Ford, outlines the limitations explaining whether or not a foreign sovereign nation or any of its political divisions, instrumentalities and agencies can be engaged in legal contentions in a US court (Schaffer 2007). This Act, which acts retrospectively, protects US businesses in such a way that they make international transactions subject to U.S law. A landmark case that may support the Foreign Sovereign Immunities Act is the case of Austria vs. Alberta, 2006.
- Discuss how an organization can use legal counsel to help mitigate its international business risks. Is it better to have counsel in the United States with offices in the region you are doing business in, or is it better to employ local attorneys in the region? Why or why not?
Legal counsel is particularly necessary for the mitigation of uncertainties associated with international business. Legal counsel is particularly necessary considering that the management of a business cannot at all times be well versed with all jurisdictions of the markets in which they operate. Apparently, the use of legal counsel will usually help an organizations deal with such things as compliance and likely changes in legal-business environment (Schaffer 2007). It is always better to use local legal counsel since they are better versed with such things as local laws and specific requirements. Worth noting is the point that bringing in American counsels may come about with such things as prejudice.
Schaffer, R., Agusti, F., & Earle, B. (2009). International business law and its environment. Mason, OH: South-Western Cengage Learning.