Measures Outlined in the Combined Code and Sarbanes-Oxley to Provide Scrutiny to Company Directors

Question
A key concept in corporate governance is independent scrutiny. Critically discuss some of the measures outlined by the the Combined Code (UK) and Sarbanes-Oxley (US) to provide independent scrutiny of the actions and the remuneration of company directors.

Answer

Measures Outlined in the Combined Code and Sarbanes-Oxley to Provide Scrutiny to Company Directors
Companies are governed by stringent rules and regulation that are established and passed in respective parliaments into laws. Financial reporting in an organization should be presented in a professional way. And ethical considerations are followed to ensure that full disclosure of information is disseminated to all the stakeholders (Meier et al., 2014). Corporate governance in United Kingdom is covered in the Combined Code and in United States it is covered by Sarbanes-Oxley. Both statutes provide independent scrutiny of the actions and the remuneration of company directors. These statutes outline measures that are strictly followed by organizations in ensuring transparency and accountability within the corporate world.
This paper discusses some of the measures outlined in the Combined Code (UK) and Sarbanes- Oxley (US) to provide independent scrutiny of the actions and remuneration of company directors.
According to Dedman (2015) Combined Code sets out standards of good practice in relation to board management and efficiency, accountability, remuneration, and good relations with shareholders in the United Kingdom. The code runs on the basis of “comply or explain” (Haxhi et al., 2012). It is a requirement of the statute that companies comply with the principles set out in the Combined Code, or if not, the company should disclose to the shareholders. Sarbanes-Oxley, on the other hand, is a set of standards for all public companies management boards and accounting firms in the United States. Both statutes cover responsibilities of company’s board of directors and provide a well laid down penalties for gross misconduct in the respective countries.
Internal control disclosure is imperative when it comes to corporate governance. In Both Combined Code and Sarbanes-Oxley full corporate disclosure is a requirement, and the reporting board of directors should adhere to this measure. The main objective of full corporate governance disclosure is to ensure that public trust is restored in the event of a financial scandal.
One of the essential features of Combined Code is an active board to provide leadership. The board is responsible for providing a clear division of responsibilities for running the company. The board ensures that there is a formal and transparent procedure for appointing directors at the best interest of the shareholders (Zalata et al., 2015). It is a prerequisite that there is a regular evaluation of the effectiveness of the Board, its individual directors and committees. This measure ensures that there is an independent scrutiny of the actions of the company directors.
In both Sarbanes-Oxley and Combined Code, it is a requirement that at companies obtain a review at least annually by an independent auditor. This measure ensures that the actions of the company directors are independent and open and to also ensure that director’s remuneration are according to the requirements of the law.
All public companies are required by the Combined Code and Sarbanes-Oxley code to report how they have applied the statute in their annual accounts and reports. Both statutes contain broad principles that are specific in the provisions and actions of the board of directors. For example, it is a requirement for directors to exercise a duty of loyalty to their companies. Director’s actions are, therefore, bound to be an act of good faith and in the best interest of the company.
Mandatory activities are also put in place by both Combined Code and Sarbanes-Oxley to ensure that there is transparency and accountability. It is a requirement by both Sarbanes-Oxley and Combined Code that there is a full disclosure of director’s actions and remuneration in the company annual reports (Haxhi et al., 2015). These mandatory activities ensure that director’s actions and remuneration are viewed in terms of independent scrutiny.
In both UK and United States, it is a requirement by law that formal and transparent measures for setting executive committee, and directors remuneration is handled by a team made up of self-governing directors and an advisory vote from the shareholders. A significant amount of the remuneration is supposed to be associated with director’s performance to ensure that it directors action promotes the success of the organization in the long-run (Meier et al, 2014). This acts as a motivation for the manager to act in a manner to promote the organization and finally brings success to the company.
It is also important to note that, breaking the principles outlined by both Sarbanes-Oxley and Combined Code results in legal actions and penalties (Meier et al, 2014). This notion helps put directors in check and ensure that their actions comply with the respective statute. So as to avoid the penalties resulting from breaking the principles outlined in the Combined Code and Sarbanes-Oxley in United Kingdom and United States respectively. Realistically, this is a measure that ensures independent scrutiny of director’s actions and remuneration, through constant auditing and checking on organizations performance and compliance with the corporate governance statute.
In conclusion, both Combined Code and Sarbanes-Oxley provides corporate governance framework instituted to guide how companies operate in accountability, efficiency, and good corporate governance. These statues play an important role in providing independent scrutiny to the actions and remuneration of directors in a company.

References
Abdullah, A., Page, M., & Institute of Chartered Accountants of Scotland. (2009). Corporate governance and corporate performance: UK FTSE 350 companies. Edinburgh: Institute of Chartered Accountants of Scotland.
Dedman, E. (2015). CEO succession in the UK: An analysis of the effect of censuring the CEO-to-chair move in the Combined Code on corporate governance 2003. The British Accounting Review.
Haxhi, I., & Aguilera, R. V. (2012). Are codes fostering convergence in corporate governance? An institutional perspective. CONVERGENCE OF CORPORATE GOVERNANCE: PROMISE AND PROSPECTS, A. Rasheed and T. Yoshikawa, eds., Palgrave.
Meier, H. H., & Meier, N. C. (2014). Corporate Governance: An Examination of US and European Models. Corporate Ownership & Control, 347.
Zalata, A., & Roberts, C. (2015). Internal Corporate Governance and Classification Shifting Practices An Analysis of UK Corporate Behavior. Journal of Accounting, Auditing & Finance, 0148558X15571736.