Enron Bankruptcy December 2, 2001 Arthur Andersen Court Case Winter/Spring 2002 WorldCom Restatement June 25, 2002; Bankruptcy July 21, 2002 Sarbanes-Oxley Act Signed July 30, 2002 SEC Regulations Stock Exchange Guidance Public outrage grows, governance credibility falls FIGURE 2.1 GOVERNANCE REFORM TIMELINE
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Enron Bankruptcy December 2, 2001 Arthur Andersen Court Case Winter/Spring 2002 WorldCom Restatement June 25, 2002; Bankruptcy July 21, 2002 Sarbanes-Oxley.
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EnronBankruptcy
December 2, 2001
Arthur AndersenCourt Case
Winter/Spring 2002
WorldCom Restatement June 25, 2002;
BankruptcyJuly 21, 2002
Sarbanes-Oxley ActSigned
July 30, 2002
SECRegulations
Stock ExchangeGuidance
Public outrage grows, governance credibility falls
Merrill Lynch 80m March 2003 Fine imposed by the SEC.Four of the Bank’s executives were found guilty of fraud and conspiracy, facing sentences of up to fifteen years in prison(Daniel Bayly, Robert Furst, William Fuhs & James Brown).
JPMorgan Chase 2.2bn
135m
August 2005. First Enron-related US Bank settlement. The bank denied wrongdoing.
August 2003. Fine imposed by the SEC. JPMorgan’s Q2/Q3 profits were $1.83bn.
Citigroup 1.7bn
120m
June 2005. Citigroup did not admit liability, and said money already set aside for legal costs would cover the payment.
August 2003. Fine imposed by the SEC. Citigroup’s Q2/Q3 profits were $4.3bn.
Canadian Imperial Bankof Commerce
2.8bn
80m
June 2005. More than annual profit yr 2005.
December 2003. Fine imposed by the SEC.Two CIBC executives also will pay fines totaling $600,000.
Toronto Dominion Bank 130m August 2005
Royal Bank of Canada 25m August 2005
Royal Bank of Scotland 42m August 2005
Sources: SEC files, newspaper articles and Enron’s website at http://www.enron.com for press releases on Megaclaims settlements.
1994The Dey Report, “Where were the Directors?,” Toronto Stock Exchange To review corporate governance and make recommendations for best practice.
1999 Five Years to the Dey Report on Corporate Governance, Toronto Stock Exchange and The Institute of Corporate Directors To survey and analyze governance procedures at TSE companies.
May 2000 The Combined Code: Principles of Good Governance and Principles of Best Practice Based on the Hempel (1998), the Cadbury (1992) and Greenbury Reports (1995), used by companies listed on the London Stock Exchange.
2000 Guidance for Directors on the Combined Code, The Turnbull Report. See Combined Code purpose.
Nov. 21, 2001 The Saucier Report, “Beyond Compliance: Building a Governance Culture,” Joint Committee on Corporate Governance, CICA/TSE To review the current state of corporate governance in Canada, compare Canadian and international best practices, and make recommendations for changes that will ensure Canadian corporate governance is among the best in the world.
Apr. 26, 2002 Toronto Stock Exchange (TSX) Guidelines Amended Revisions effective Dec.31, 2002 to adopt some Saucier Report recommendations.
Apr. 4, 2002 SEC Blue Ribbon Committee Discussions
2002 Various Business Roundtable—various statements
June 6, 2002 NYSE Corporate Governance Listing Requirements, Effective Aug. 2002, after SEC approval A review at the request of Harvey Pitt, SEC Chairman, to enhance the accountability, integrity, and transparency of companies listed on the NYSE.
June 28, 2002 SEC Order effective Aug, 14, 2002 CEO and CFO to certify 8-K, quarterly and annual financial reports.
July 9, 2002 President George Bush’s Proposals Speech Visit the text’s website for links to the organizations’ websites
TABLE 2.8KEY CHANGES IN GOVERNANCE GUIDELINES AND REGULATIONS
TABLE 2.9ORGANIZATION OF THE SARBANES-OXLEY ACT of 2002
SECTIONS TITLE
1, 2, 3 Short Title, Definitions, Table of Contents
101–109 I Public Company Oversight Board
201–209 II Auditor Independence
301–308301
III Corporate ResponsibilityPublic Company Audit Committees (including whistle-blower encouragement)Corporate Responsibility for Financial Statements (including CEO and CFO certification)
401–409404406
IV Enhanced Financial DisclosuresManagement Assessment of Internal ControlsCode of Ethics for Senior Financial Officers
501 V Analyst Conflicts of Interest
601–604 VI Commission Resources and Authority
701–705 VII Studies and Reports
801–807 VIII Corporate Criminal Fraud Accountability
901–906 IX White Collar Crime Penalty Enhancements