Sunbeam Company, Research Paper Example
Words: 676Research Paper
What is the implication of the accounting misconducts for corporate governance? What have standard setters done to address the accounting problems of your company?
This paper provides an explanation of the implications of accounting misconducts on corporate governance in Sunbeam Company. It will further explain what the standard setters have done in addressing the accounting problems in Sunbeam Company. Sunbeam is an American company that deals with production of electric home appliances. The company has been in existence since 1990. Its products include the Mixmaster mixer, the sun beam CG waffle iron, and fully automatic T20 toaster. It is owned by Jarden consumer solution (George William, 2003, 43). This company is a victim of accounting misconducts which have dragged it behind in its corporate governance and business triumph.
What is the implication of the accounting misconducts for corporate governance?
Accounting can be defined as the process of compiling information for reporting the internal affairs of any business organization to various stakeholders at the end of a given period. Accounting ensures that there is continued good corporate governance (GCG) within an organization. Whenever misconducts occur during accounting process, corporate governance is impacted negatively. For instance, accounting problems regarding whether cooperate governance encompass the relationship between the share holders and the managers or it is expansive to cover even the relationship between shareholders and the board may lead to dangerous accountability issues. Accounting misconducts are usually ethical in nature and bring conflicts that are ethical in nature which affect the company adversely. For instance, poor accounting practices may lead to agency problems, national policy crisis, goal congruence crisis, reverse agency problems, tunneling, non-compliance, power crisis and customer vs. management crises (George William, 2003, 43).
Agency problems will arise when people of different positions in the company sacrifice corporate wide goals to pursue personal interests. Tunneling involves situation whre majority shareholders, capture minority share holders, and non-compliance results from the avoidance of different local, regional, and international laws, regulations, codes, treaties, and other requirements. Power ego is very common in top management and has potential of bringing the company to zero in a day. These are the implications of accounting in corporate governance. Misconducts in accounting, lead to bad corporate governance which lead to failure of organizations. For instance the change of chief executive officer of Sunbeam after a poor performance report in 1998 led to the fall of the company which was a mere mistake of accounting which lead to ambiguity in corporate governance.
What have standard setters done to address the accounting problems of your company?
According to Gompers, Ishii, & Metrick, James (2003), Accounting / audition rules are set to be universal and apply to all corporate (pg.107-155). The accounting problems in Sunbeam Company are best addressed by the codes of ethics that standard setters have put in place. They include:
- The standard setters are have set guidelines to encourage compliance with the global accounting standards. Non- compliance with global accounting standard is illegalized and prosecutable in the court once discovered. This is aimed at strengthening accounting standards at Sunbeam Company.
- Standard setters have devised a method of balancing power between management and the board. It was discovered that conflict between the board of directors and the management had been the cause of major accounting misconducts. Thus balance between the two sunbeam companies can improve accounting practices and enhance good corporate governance.
- Setting up of compensation package for different levels of management will stop corruption during accounting and make mangers and stakeholders more accountable and sincere in company management and report preparations. This will ensure that there is fairness, transparency, and accountability.
- Standard setters have also set up a gradual strategy of moving from soft to hard laws. This is because unethical company can overlook even the most draconian regulation. This strategy will ensure that the company has every governance practice in form and in substance.
Gompers, Ishii, & Metrick, James .Corporate Governance and Equity Prices, Quarterly Journal of Economics, Vol. 118(1), pp. 107-155. 2003.
George, William Antique Electric Waffle Irons 1900-1960: A History of the Appliance Industry in 20th Century America. Trafford Publishing. pp. 42. 2003.
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