Corporate Governance: Determining Executive Compensation

Originally Published MX March/April 2004

FINANCE

Medical device company boards of directors can strengthen investor confidence by setting standards and adhering to best practices.

Ted Ginsburg

The wave of scandals at publicly traded corporations continues today. Beginning with the collapse of energy giant Enron Corp. after the company's fraudulent accounting practices were revealed in 2001, news of corporate transgressions persists. Such improper business dealings led Congress to enact the statutory changes embodied in the Sarbanes-Oxley Act of 2002, and have also led to the creation of new exchange registration rules for publicly traded companies. Nevertheless, it seems that another company is charged with some type of financial misdeed on a monthly, if not daily, basis.

The investing public, members of Congress, influential business groups, and the media blame greedy corporate executives and inattentive boards of directors for this problem. These groups argue that today's corporate misdeeds are rooted in the following problem areas.