The paper 'Corporate Governance Financial Crime Ethics and Controls in the UK and the US' is a wonderful example of a Finance and Accounting Essay. Issues of corporate governance, ethics, and controls as well as financial crime continue to gain significant interest in the corporate world especially in the United Kingdom (UK) and United States (US) especially after the collapse of WorldCom and Enron in 2002. Corporate governance involves processes and systems among corporate entities that are established to ensure openness, probity, and proper accountability in the way they conduct business.
The concept of corporate governance was passed in the UK after initial development and implementation in the US (Ping & Andy, 2011, p. 8). These countries operate under rules and regulations founded on the disclosure concept and uphold responsibility, fairness, accountability, and transparency to gain the necessary confidence and trust of shareholders (Mendez, 2014). While there is no universal corporate governance model, the UK corporate governance environment remains volatile with significant influence from the US and Europe. National laws and regulations as well as the expectations of shareholders and economic goals dictate how corporations work.
However, some measure of corporate convergence has largely resulted from standards required by capital markets and international investors. This essay compares and contrasts corporate governance, financial crime reporting, and ethics, and controls among corporate companies in the US and UK. Corporate Governance, Financial Crime, and Ethics and Controls in the US and UK The UK and the US corporate governance systems have common goals of bringing profits to the shareholders, the primary beneficiaries of fiduciary duties (Dowdey, 2005). Both countries operate under active markets for corporate control, uncommitted shareholder’ s dispersed share ownership, and the importance of equity financing.
The UK corporate governance regulations are drawn from common law rules such as the director’ s fiduciary duties, statutes like the Companies Act of 1985, Listing Rules, and the company’ s constitutional documents. Moreover, Financial Services Authority, Non-legal guidelines from institutional investors, the Combined Code on Corporate Governance (CC-2008), and the Combined Code on Corporate Governance also have an input on regulations, rules, and recommendations of corporations. The Combined Code provisions are mandatory for listed companies to provide a statement for reasons of compliance or non-compliance (Dowdey, 2005).
On the other hand, the US corporate governance regulations are largely determined by the Sabarnes-Oxley Act of 2002 drawn by NASDAQ, New York Stock Exchange, and the Securities and Exchange Commission (Barnett & Balasundram, 2008, p. 24). The reigning principles of good corporate governance practiced by the two countries include responsibility, fairness, accountability, and transparency to gain the necessary confidence and trust of shareholders (Mendez, 2014, p. 20). Corporate governance in the UK uses the ‘ comply or explain’ approach while the Sabarnes-Oxley Act (SOX) uses the general approach (Ofori, 2011).
Yet, SOX related regulations are derived from ‘ comply or explain’ even though it relies on imprisonment penalties and fines for violations. For example, the US regulations are less robust as compared to the regulatory intervention in the UK and other European countries (Clarke, 2016, p. 29). Furthermore, the UK corporate ownership and control are highly fragmented and dispersed which results in the weakening of ownership and reduced the board’ s influence on the direction of the company (Mallin, 2004). Conversely, the US ownership landscape is even more dispersed which has given rise to institutional investors and strong managerial influence on the direction of the company (Mendez, 2014, p. 13).
In the UK, voting power is concentrated among committees and has incentives to perform direct monitoring while in the US, voting power is dispersed and has led to more scandals and corporate excesses (Mendez, 2014, p. 20). Nonetheless, both countries have strong managers and weak owners. Besides, the US economic model on corporate governance is market-oriented and emphasizes on unbridled competition where market forces operate under a regulatory framework of ‘ winner take all’ criteria (Mendez, 2014, p. 7).
On the other hand, the UK model is based on ‘ comply or explain’ which draws on culture and traditions, flexibility and corporate ownership structures gave the varying legal frameworks.
Aguilera, R. V., Williams, C.A., Conley, J.M. & Rupp, D.E. (2006). Corporate Governance and Social Responsibility: a comparative analysis of the UK and the US. Corporate Governance: An International Review, 14(3): 147-158.
Albert-Roulhac, C. & Breen, P. (2010). Corporate Governance in Europe: Current Status and Future Trends. Journal of Business Strategy, 26(7): 19-29.
Barnett, A. & Balasundram, M. (2008). A Comparison of US Corporate Governance and European Corporate Governance, The Business Review, 9(2):24-30.
Dowdey, A. (2005). Corporate governance in the UK and the US comparison. Metropolitan Corporate Counsel.
Clarke, T. 2016). The continuing diversity of corporate governance: Theories of convergence and variety. Ephemera Journal, 16(1): 19-52.
Financial Reporting Council, (2010). The UK Approach to Corporate Governance, October 2010, online at: http://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/The-UK-Approach-to-Corporate-Governance.aspx, accessed on: 01.02.2013.
Grossman, N. (2013). Director Compliance with Elusive Fiduciary Duties in a Climate of Corporate Governance Reform. Fordham Journal of Corporate and Financial Law, 12(3): 393-466.
Jackson, K. V. (2011). Towards a Stakeholder-Shareholder Theory of Corporate Governance: a Comparative Analysis. Hasting Business Law Journal, 7(2): 309-392.
Mallin, A. C. (2004). Corporate Governance, Oxford University Press.
Mendez, M.A. (2014). Corporate governance: A US/EU comparison. University of Washington.
Nordberg, D. (2011). Corporate Governance: Principles and Issues, SAGE Publications.
Ofori, S.K. (2011). A Comparative Study of Corporate Governance in the UK and the US. ResearchGate.
Ping, Z. & Andy, C.W. (2011). Corporate Governance: A Summary Review on Different Theory Approaches. International Research Journal of Finance and Economics, 68(2): 7-13.
Tricker, B. (2012). Corporate Governance: principles, policies and practices, 2nd Edition, Oxford University Press.
Yeoh, P. (2016). Corporate governance failures and the road to crime. Journal of Financial Crime, 23(1): 216-230.