Sarbanes-Oxley Act Of 2002 Answers

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Sarbanes-Oxley Act Page 1 Sarbanes-Oxley Act Paula E. Noble University of Phoenix Sarbanes-Oxley Act Page 2 PART A: “The Securities and Exchange Commission was created in 1934 to police the U.S. financial markets. Today, the Securities and Exchange Commission continues to create legislation tightening reporting standards and providing more transparency. Unfortunately, increasing standards often comes after a failure of the system. The Sarbanes-Oxley Act of 2002 is a primary example of legislation following financial market failure. Sarbanes-Oxley influenced public businesses through transformation of the financial system. Public companies required to comply with Sarbanes-Oxley incur additional costs directly attributed…show more content…
All three of the shareholders must consent to becoming an S corporation. All other qualifications are met by Pharma. Pharma is a domestic corporation without nonresident or alien shareholders. They have a single class of stock and none of its partners are a corporation, partnership, or discretionary trust. The number of shareholders is only three which is far below the maximum of one hundred. None of the shareholders own more than eighty percent of stocks in any subsidiary corporations. 3. Did Adams have the right to hire Elliot without the others’ consent? Suppose that Cornelius believes that Elliot is not a good hire for Pharma. Can he fire Elliot? Although Adams may have had the legal right to hire Elliot without the consent of the others, it was a morally wrong decision not to seek the consent of the other shareholding partners. As a privately held corporation which is small in size, the promotion of business efficiency is an objective best served by enabling the owners to arrange the organization of the enterprise as they choose unless such decisions are outside the scope of the partnership business which would make it impossible to…show more content…
One could argue though, that receiving a five year employment borderlines financial benefits especially given the worsening financial position of Pharma. Adams and Barker also lacked diligence in investigating the proposal, decision, and transaction and never consulted outside experts. “Directors’ and officers’ decision-making procedures must be set up in a way that allows careful decisions to be made regarding the best interests of the corporation”. (The Legal Environment of Business, 2011) The argument could be made both ways about protection by the business judgment rule concerning rational belief. For Pharma to survive and become viable it was obvious that some decisions had to be made, but was the sale of the assets in the best interest of the corporation, or was it in the best interest of Adams and Barker? One can only conclude that the directors violated all their duties of financial interests, care and rational belief and were not acting with best information and, thus, cannot be shielded by the business judgment rule. 7. What type of lawsuit, derivative or direct, would be filed by Cornelius

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