Corporate fiduciary duties and their role in Sarbanes-Oxley compliance

Corporate Fiduciary Responsibility and Sarbanes-Oxley Compliance
Corporate Fiduciary Responsibility can be defined as the duty to perform corporate responsibilities with the best interest of other parties to the project at heart. For a corporation fiduciary responsibility involves taking care of the interest of the board. It is the responsibility of a corporate board to take care of shareholder interests in every decision that they make (Lukey, 1994). Fiduciaries duties include the following:
Duty of care: The project’s officers and directors must be diligent enough and careful enough during the decision making process because they owe it to the shareholders who happen to be the actual owners of the project at hand (Sullivan, 2016). In short the responsible officers must at with reasonableness as any person who holds a leadership position would, they must also have reason to believe that their decisions are executed in the corporation’s best interest, and they must always act in good faith (Law Society of Upper Canada, 1991).
Good faith: Every fiduciary responsibility must be executed in utmost good faith. Good faith is closely linked to loyalty duty. The decisions that come from officers or directors to a project must be executed in good faith and in the shareholders and corporations best interests every single time (Lydenberg, 2014). The given duty is likely to change depending on the company status. Depending on whether an organization is insolvent or solvent the directors’ fiduciary duty might change (Hawley, 2015). There is a close relationship between obedience, loyalty and care responsibilities. Corporate directors are required to perform their duties in utmost fairness, good faith and honesty when handling and project obligations for their corporation (Sullivan, 2016). The duty informs and guides their daily operations and tasks executed on behalf of their corporation.
Loyalty: Project officers and directors are required to pay undivided loyalty to their shareholders and to their corporation. Their personal interests must never override those of the shareholders or the corporation. The loyalty responsibility may be violated when the officers or directors in charge choose to secretly seize profits gained from a project, engage in self-dealings, take up corporate opportunities for self-gain, and get into competition with the corporation. Disclosure is fundamental in any corporate dealings. Project officers should disclose any suspicious transactions and seek permission from the board and shareholders before conducting them (Lydenberg, 2014). Reason and rationality must always inform the conduct of corporate officers.
The doctrine of corporate opportunity requires directors and officers to a corporation to never enter into secret missions aimed at robbing their organization any opportunities for their personal gains. Where for instance directors secretly learn that there is a lucrative opportunity offered to their company they must not enter into any secret mission to defraud their company of profits. They must also not acts in a way that will interfere with the interests of their corporation. Some fraudulent and self-seeking officers can choose to seize opportunities belonging to the corporation where the corporation has since rescinded their interest in such an opportunity. It is a sign of disloyalty for such officers to intentionally gain profit from rescinded projects.
Disclosure: It is paramount to have utmost disclosure between shareholders, directors and company officers in order to arrive at informed decisions and sound risk assessment. Prior to seeking the approval of any board it is important to do a fair and full disclosure. Decisions such as mergers or acquisitions require utmost disclosure. In honor of their disclosure duties directors and officers must reveal any likely conflict between their personal interests and the interests of their company.
Sarbanes-Oxley Compliance is a reform introduced by the U.S. congress in 2002 with an objective of protecting investors from the likelihood of suffering from malicious corporate activities. The 2002 SOX Act introduced detailed reforms in financial disclosure requirements for corporations with a view of preventing fraud. This Act was a response to the growing malpractices in financial reporting which threatened to destroy confidence among investors. There was a need to overhaul and reform the financial regulatory standards (Ambler et al., 2016). The enforcement policies and rules detailed in the 2002 SOX Act supplement the legislation in place for dealing with financial security. SOX reformed the areas of criminal punishment, corporate responsibility, accounting regulation, and introduced new protections. Senior management officers are required by SOX to certify and verify that financial statements are accurate and sound. The auditors and management are also required to institute internal controls and reporting standards.
The 2002 SOX Act has three regulations that influence the process of record keeping. First, the rules regarding falsification and destruction of records, second, the period within which records can be stored, and thirdly, the type of business records each company should store. The 2002 SOX Act also details what the department of information technology is required to do in relation to electronic records. The Act defines the nature of company records that should be stored on any file and the period such records should be sequenced. Important to note is that SOX does not specifically dictate how business records should be kept. That is the duty of the department of information technology. SOX will also not set any business practices to this effect.
Proposed Project
The proposed project entails the expansion of a hospital facility. The goal is to enhance capacity due to the growing number of in-patient requests for expectant mothers, critically ill, and accident victims. The hospital management it its wisdom has found it necessary to expand the bed occupancy, the pediatric wing, the emergency and accidents department, and hospital personnel, and necessary hospital equipment. The expansion process will entail contracting a construction company, acquiring more beds through a public tender, hiring 10 consultants, pediatricians, medical doctors, surgeons and nurses.
The board of directors has proposed a time period of one year for the entire expansion drive to be completed. The budget for the expansion is estimated at $10.4 million excluding the salaries and allowances of the new hospital personnel. According to Sarbanes-Oxley Compliance requirements utmost financial disclosure for this project is required. Sarbanes-Oxley will most definitely affect the hospital expansion project for a number of reasons. To begin with the project manager will bear full individual responsibility for the completeness and accuracy of the financial reports relating to the project. There has to be independent auditing processes that will be go hand in hand with the project execution process. The project manager’s corporate responsibility is expected to limit their behavior in approving and certifying the financial reports integrity (Devinney, Schwalbach & Williams, 2013).
The detailed financial disclosure requirement for all financial transactions which include all transitions on and off the balance sheet for the sake of financial disclosure and reporting accuracy will most definitely take up time for the project manager. This will most likely affect the deadline for project completion for a number of reasons. First, the project manager is expected to interact with the project auditor on regular basis. In order to uphold project confidence the project manager has to be cleared of any conflict of interest. To ascertain whether there is any conflict of interest the project manager will be subjected to a rigorous vetting process (Indiana Continuing Legal Education Forum, 2004). All the checks and balances enforced by the 2002 SOX Act could grossly interfere with the contracting process. Very many checks and balances have to be put in place while hiring a contractor and purchasing hospital equipment.
Despite the detailed financial disclosure processes the performance of the hospital expansion project is expected to perform very well. SOX rules have fundamentally improved investor confidence due to the expectation that every financial detail will be disclosed and stored properly for future reference. Since the hospital expansion project has a financial bearing it must be executed in compliance with all the Sarbanes-Oxley rules. This means that the project manager is required to understand every requirement from utmost disclosure, conflict of interest, financial reporting, auditing, and corporate responsibility etc. Every move made by the project manager must be viewed from the lens of compliance with all SOX rules. While this might mean enhanced disclosure and intelligent use of financial resources it will also cause the project to take more time for completion than anticipated.
In order to mitigate any negative impacts from the 2002 SOX Act certain actions must be taken. To begin with the hospital directors charged with appointing the project manager must assign this responsibility to someone who is familiar with the SOX Act. The fiduciary duty of the project manager must also not be questionable. This means that the hiring authority must go for a project manager with a solid performance and ethical background. The hospital must get a project manager who has no conflict of interest, one who will pledge loyalty to the institution, one who will act in good faith and one who will act in full honesty and full disclosure for every financial transaction or otherwise. The project manager must be above board.
If SOX is not complied with during the project execution process very many things can go wrong. There is a good chance that any negligence in financial disclosure requirements can mean loss of money through fraudulent dealings, kickbacks and blatant theft of money meant for the project. This would compromise the quality of the new hospital facility, the hospital equipment and the integrity of the new structure. Such negligence can cause loss of innocent lives in the hospital after the new facility starts taking in new patients. Since SOX safeguards financial integrity of any institution failure to uphold the rules can lead to numerous losses and threaten the existence of the institution in future. The hospital has to get value for its money. Every coin in the $10.4 million budget must be accounted for. As the project manager it is my duty to ensure that I understand all the Sarbanes-Oxley compliance requirements and my fiduciary duties. This way it will be possible to safeguard the interests of hospital stakeholders and complete the project within budget and in the specified time duration.
Visual aid for Corporate Fiduciary Responsibility and Sarbanes-Oxley Compliance

References Ambler, D. E., Massaro, L., Stewart, K. L., & Wolters Kluwer (Firm). (2016). Sarbanes-Oxley Act: Planning & Compliance. New York: Wolters Kluwer Devinney, T. M., Schwalbach, J., & Williams, C. A. (2013). Corporate Social Responsibility and Corporate Governance: Comparative Perspectives. Corporate Governance: An International Review, 21(5), 413–419. https://doi.org/10.1111/corg.12041 Hawley, J. P. (2015). Cambridge handbook of institutional investment and fiduciary duty. Cambridge: Cambridge University Press Indiana Continuing Legal Education Forum. (2004). Sarbanes Oxley (SOX): An overview and update. Indianapolis: Indiana Continuing Legal Education Forum. Law Society of Upper Canada. (1991). Fiduciary duties. Scarborough, Ont: R. De Boo. Lukey, J. (1994). A Fiduciary duty. Salt Lake City, Utah: Northwest Pub. Lydenberg, S. (2014). Reason, Rationality, and Fiduciary Duty. Journal of Business Ethics, 119(3), 365–380. doi.org/10.1007/s10551-013-1632-3 Sullivan, R. (2016). Fiduciary Duty in the 21st Century. SSRN. doi.org/10.2139/ssrn.2724866