Corporate governance in Adelphia Communications Corp., US Term Paper

Corporate governance in Adelphia Communications Corp., US - Term Paper Example In the United States, checks and balances prevent any branch from accumulating too much power, hence encouraging cooperation. According to Kroszner (Para. 9), good corporate governance requires strong executives with an independent mind. Moreover, the Sarbanes –Oxley Act of 2002 applies to all organizations and it entails the requirements for the governance of organizations. The Act requires that management of an organization should certify a company’s financial reports and internal controls too. Despite the United States corporate governance being heavily criticized for the failure of some of major companies like Tyco and WorldCom, the country has improved on its Sarbanes –Oxley Act of 2002. The Sarbanes–Oxley Act promotes accuracy and accessibility of information, whereby investors are required to reveal the company’s transaction. The Act also involves penalties for those violating regulations; for instance, a maximum of 20 years in prison for fra ud rather than a five-year sentence. Corporate governance entails the controlling and directing of companies in a direction of fairness, accountability, and transparency. Below are checks and balances within the corporate governance of the United States. ... ct fosters the principle of accuracy and accessibility whereby, it requires the revealing of company’s stock after the second day of transaction by its directors and principal investors. This fast revelation of the company’s stock makes it easier for the outsiders interested in the company. Failure to abide by the laws of this Act; a person is liable to 20 years of imprisonment. This act is aimed at creating quality standards for corporate governance, which managers and auditors must abide by. Management accountability The Sarbanes –Oxley Act fosters management accountability, hence preventing issues of fraud and the blame game. A corporate fraud task force was established in 2002 with an aim of curbing fraud in organizations. Accordingly, the managing directors and officers must certify the accuracy of their company’s financial reports. The Act requires a total of $1million for any officers who knowingly engage in false certification of financial reports. Auditor independence Auditors are limited to false and careless financial reports. However, this Act makes it difficult for managers to select and compensate an external auditor. The choice of an auditor is now made by the committee of independent directors who are not employees of the organization, hence being not related to the company. A new audit partner is required to be assigned to each client account. In addition, the government has formed the Public Company Accounting Oversight Board, with an aim of monitoring and enforcing the supply of audit services. Moreover, accounting firms are required to register with the oversight board, submit their periodic performances, and abide to the rules and regulations of the board (Kroszner (Para. 20). The Sarbanes –Oxley Act ensures that rules are followed to the