Global Corporate Governance Standards: Pros and Cons

Global Corporate Governance Standards: Pros and Cons 1.0 Background and history Increasing numbers of public companies and shareholders base lead to shareholders of the companies not involved in management and control their own company. Thus, they employed professional managers to running their business as a result some of the managers are not working on the behalf of shareholders and caused companies collapsed through financial statement fraud and money laundering. The case Watergate scandal due to break-in to Watergate building complex in the United States at 1970s had lead to arising of Corporate Governance. Besides, UK had experienced increasing numbers corruption by senior executives or director in late 1980s and early 1990 as well. Corporate such as Enron scandal in US caused by conflict in interest of Arthur Andersen which was as an auditor and consultant at the same times lead the Enron Corporations and one of the five biggest accountancy and audit firms in the world collapsed. Besides, Lehman Brothers and several UK and European Banking Groups were coll apsed in recent year at September 2008 due to poor corporate governance. Thus, Corporate Governance is the system by which companies is directed and controlled (Cadbury Committee, 1992) in order to avoid fraud happened. It is the responsible of Board of Directors to governance their companies and work on the behalf on stakeholders in their companies. Due to control failure at several major corporations, USA and UK had introduced numbers of guidance reports and laws in individual country in order to have an effectiveness internal control, independent audit committees, and directors remuneration packages results in increase the reliability of financial statements. For instance, there was Foreign and Corrupt Practices Act of 1977 and Treadway Report published in 1987 at US while there was Cadbury, Rutteman, Hampel and Turnbull reports available at UK since 1992 2.0 Advantages and disadvantages of global corporate governance standards Since we are moving toward globalization of business and growth of global capital market, there are quite a numbers of advantages of implemented global corporate governance standards as a basis to replace national basis of corporate governance. Meanwhile, organizations all over the world are adopting same principles of corporate governance which it can reduce cost of organizations compare to national basic of corporate governance. It is expensive to cost organizations when they adopting additional set of rules imposed by local government. Stanwick (2008) claimed that in direct response to the corporate scandals of Enron and WorldCom, the Unites States Congress passed the Sarbanes-Oxley Act (SOX) in 2002.When it passed in 2002, many corporations were vocally opposed to it and claimed that is was just an additional set of government regulations that would cost additional time and money which they could not afford in an increasingly competitive global marketplace. Additionally, it can e nsure foreign investor no need to facing multi-codes when they are investing at overseas. For instance, Combined Code at UK based organizations and SOX at US based organizations would be removed. By the way, all organizations implemented global corporate governance able to stimulate performance of top-level management. Since institutes clear accountability and effective link between reward and performance, top-level management will on the behalf of stakeholders and adherence to the standards. Moreover, investors investing their capitals in others countries would get better protected and would be more safety compares to every countries implementing different set of corporate governance standards. Roussey (1997, pg207) stated that once a business entity lists its shares outside of it national borders, it should be subject to a set of global corporate governance rules. It can effectively decrease the chance of top level management using investors capital for self-interest as well as it required companies to disclose all relevant information while implemented global corporate governance standards. Thus, high quality financial reporting and credible accounting provides the transparency than enables investors to make informed evaluation of investment opportunities (Sutton, 1997). Besides, it can attract more foreign investors to invest in the capital market since risk of investors invest in foreign country has reduced and capital markets has becomes more stability. Consequently , there is more and more investors invest in capital market results in organizations getting abundant funds to running their business as well as shareholders getting more dividends in return. Next, global in business move toward to use of global shares. As it enable investors to access home country capitals market and non home country capitals market by using same form of shares. In November 1999, for example, Daimler-Chrysler listed on the New York Stock exchange the same shares listed in its home market (Roussey, 2000). Despite of this, it is needed to implement global corporate governance standard to effectively protect shareholders capital. Furthermore, implemented global corporate governance standards can effectively counter financial statement fraud and money laundering by top management which led to corporate collapse. Otherwise it will back to the situation of severe misstatement of financial statement happened in 2002 such as Enron, Tyco, Global Crossing, and Worldcom. All of these are due to nation poor corporate governance exists at those companies and has introduced new corporate governance standards like Sarbanes-Oxley Act (SOX) in 2002 to replace previous standards. Under International Standard on Auditing (ISA), auditor has to communicate audit matters with those charged with governance of an entity in all audit situations, and not just in audits of publicly traded entities (Roussey, 2000). It claimed that auditor must informed and discussed with the people who accept the responsible for companies once they discovered organizations have poor corporate governance such as poor internal control system and missta tement of financial statement. Therefore, they can establish appropriate strategies to address those matters through the knowledge and experience of auditor. By the way, auditor and people who accept the governance responsibilities would be appointed by International Auditing Practices Committees to make sure they are independent enough. Thus, employees at top management level are work accordance with the standards of global corporate governance and move towards credibility of financial statement which prepared by them. Nevertheless, it is possible for top management not to comply with the standards of global corporate governance after long periods of implementation it. As it is developed from convergence of corporate best practice and global legal system, top management likely to take legal loopholes once they familiar with the standards of corporate governance in order to satisfies their needs. Additionally, it just only and only one standard that all the organizations need to comply with. Political will is absolutely crucial to the developing of means and methods to integrate domestic corporate practices with the best standards followed internationally. Only then can integrity of a countrys economic system get reflected properly and foreign investment in domestic business increase (Bhasa, 2004). Implementation of global corporate governance standards is hard to satisfy the needs of shareholders and stakeholders from all over the world because everyone has different demand. However, diverse in cultural and organization structure lead to people accept the responsibilities of governance find it difficult to adapt since the organization members are in different value and belief results in they are using different kind of behavior to achieve organization objectives. For example, the problems of corporate governance arise when the rights of the stakeholders are violated. However, what may be considered stakeholder rights violation in one country might not necessarily be considered so in some other country. This diversity may be particularly because of the different legal structures and cultural settings adopted by different nations (Bhasa, 2004). Cross-cultural psychological, sociological, and anthropological research shows that many cultures do not shares the same assumptions underlying leader behavior and style (Den Hartog et al, 1999). Thus, global corporate governance standards must devise appropriately according to every countries culture dimension and condition. Otherwise it is so hard to monitor the provision of strategic direction performance by top-level of managers in different country are align with companies objectives. Besides, globalization of business lead sociopolitical dynamic and the relation between business, stakeholders, and government will change. According to International Capital Markets Group studied international corporate governance in 1994-1995 (ICMG, 1995), it concluded that it was not appropriate, given the need to respect diverse cultures and legal structures, to prescribe an international standard for corporate governance (Roussey, 2000). 3.0 How the situation might develop or be resolved with the next year or so Based on the articles, there is a need to for global corporate governance standards for all corporations because it can add another extent of protect foreign as well as local shareholders and stakeholders. It encourage the internal securities commissions to consider development and implementation of a set of global corporate governance rules applicable, at a minimum, to business entities listing shares or obtaining financing in the public capital markets outside of their national borders (Roussey, 2000). Additionally, it can enhance the transparency relationship between shareholders and companies since the resources in every organization are use appropriately as well as top-level managers are not abuse their responsibilities on their own interest. Other than that, global corporate governance provides everyone to rely on the organizations financial statement and take it as a reference when investing as well as reporting to shareholders during annual general meeting. N-nitrosamines in Food: Effects and Legislation N-nitrosamines in Food: Effects and Legislation Effects and response The safety of exposure of humans to inorganic nitrite and nitrate received increased scrutiny in 1960s. Cases of infantile methemoglobinemia associated with high nitrate in drinking water were documented. Besides, the formation of N-nitrosamines in certain foods, which had been shown to be carcinogenic, raised awareness regarding potential human health concern. A plausible biological mechanism which explains carcinogenicity of ingested nitrate and nitrite is endogenous N-nitrosation reactions (Bryan et al., 2012). Normal intakes are not proven to have carcinogenic effects. On the other hand, it is the excessive nitrate or nitrite intake which can generate N-nitroso compounds which are carcinogenic and mutagenic by causing DNA alkylation. N-nitrosamines are also genotoxic, which interacts with DNA directly or indirectly, inducing permanent genetic changes in cells, and causing cancer. For this group, as there is no dose which does not result in a possible effect of the genotoxic carcinogens, thus a no observable effect level (NOEL) cannot be estimated (Ravnum et al., 2014). In addition, exposure to nitrosamine affects the immune response strongly. Nitrosamine-induced response towards the immune system is much stronger than nitrosamide-induced response, in a same exposure period. Nitrosamine induces a higher percentage of modulated genes, and involves more pathways. This immunosuppressive effect in turn influences the innate immune response of cells. This plays an important role in the promotion phase of carcinogenic processes, indicating an additional way for nitrosamines to cancer risk (Hebels et al., 2011). Animal toxicology research serves as an important area for investigation which provides us with safety data. About 90% of the 300 nitrosamines tested showed carcinogenic effects in laboratory animals and bioassays. Nevertheless, the usage of animal models requires understanding of the difference between human and animal systems. Rodents used for this purposes have fore-stomachs and Hardarian glands, which is not analogous as in humans (Bryan et al., 2012).. Acute toxic effects of nitrate intake had been encountered only at very high doses. On the other hand, nitrite causes acute toxicity in much smaller doses. In laboratory animals, the LD50 of inorganic nitrite is approximately 2.6 mmol/kg. Some early studies may have shown methaemoglobinaemia when exposed to lower doses of nitrate due to contamination with nitrite (Gilchrist, Shore and Benjamin, 2010). A follow-up study of the Swedish Mamography Cohort found that there is a two-fold elevated risk of stomach cancer with intake of dietary nitrosamines (Larsson, Bergkvist and Wolk, 2006). On the other hand, Loh et al. (2009) suggested that there is a positive association between N-nitrosamine intake and gastrointestinal cancer, especially rectal cancer (Loh et al. 2009). N-nitrosodiphenylamine has shown carcinogenic effects at levels of 1000 parts per million (ppm) to 4000 ppm in both sexes of rats, and there is induced transitional cell carcninoma of the urinary bladder of male and female mice. Dimethylamines and diethylamines are two of the most potent carcinogens among nitrosamines. 50 ppm of dimethylamines in the diet was found to produce malignant liver tumours in rats in 26 to 40 weeks. Meanwhile, higher doses were shown to cause kidney tumours. For diethylamines, a lag period between dosing and onset of tumours increases with dosage below 0.5 mg/kg, with the total tumour yield remaining roughly the same. There is not yet a clear threshold dose for carcinogenicity of nitrosamines in diet established (Shibamoto and Bjeldanes, 2009). According to the Netherlands Cohort study, nitrate and nitrite exposure based on food intake and drinking water show no significant elevation in stomach cancer occurrences, and shows no apparent trend (Larsson, Bergkvist and Wolk, 2006). On the other hand, there is evidence that long-tern consumption of drinking water which contains more than 4 mg/L nitrosamine has been positively associated with risk of non-Hodgkin’s lymphoma. Although nitrates are absorbed quickly in mostly excreted within the next few hours, the internal dose or nitrosamine cannot be measured as a 24-hour urinary excretion. A study done by Levallios et al., (2000) showed that there is a stronger correlation between urinary nitrate excretions with dietary nitrate as compared to urinary nitrate excretion with water nitrate intake. Nevertheless, there is no relation found between nitrosamine excretions with nitrate intake. This might be due to low nitrate concentrations in water, thus causing it to be harder to observe for immediate effects. Further studies are required to determine if the use of urinary nitrosamine excretion as a biomarker of exposure is useful (Levallois et al., 2000). Food laws (limits) EU legislation allows nitrite and nitrate addition of 150 mg/kg respectively for each additive in meat products. On the other hand, Denmark only permits the use of 60 mg/kg of nitrites in meat preservation for Danish products (Herrmann, Duedahl-Olesen and Granby, 2015). Further studies are required to determine if the addition of 150 mg/kg or 60 mg/kg of nitrite added would cause an increase in average nitrosamine levels. On the other hand, there are no maximum limits established by EU for nitrosamine content in processed meat products. The United States had set a limit of 10  µg/kg of total volatile N-nitrosamine content for cured meat products (Crews, 2010). The highest amount of a contaminant allowed in drinking water is known as maximum contaminant level (MCL). The US Environmental Protection Agency (EPA) has set a (MCL) for N-nitrosodiphenylamine of 7  µg/L (micrograms/Liter) or 7 ppb (parts per billion) based on a lifetime cancer risk of 1 in 1 000 000 (ATSDR, 2010). The EPA established a cancer risk if 0.7ng/kg body weight of N-nitrosodimethylamine is consumed daily. In drinking water, the maximum allowed concentration of N-nitrosodimethylamine in Canada is 40 ng/L and 10 ng/L in Germany (Mestankova et al., 2014). Although the EPA has not established a limit for maximum contaminant level in water, the California Department of Health Services has established 10 ng/L as notification level for action to be taken (Mestankova et al., 2014). The amounts of N-nitrosodiphenylamine in some commonly eaten foods are 0.023  µg/100g in buns, muffins and bagels, 0.149 µg/100g in ham, and even 0.109 µg/100g in oysters (Stuff et al., 2009). Current issues (worldwide) Apples from America have recently encountered some export issues to other countries due to its toxicity. In America, apples which are to be exported are treated with diphenylamine (DPA), which is a preservative added to prevent the apples from turning brown for as long as a few months. This is to prevent cold injury during cold storage, since apples are usually harvested once a year. By itself, DPA isn’t harmful, but it breaks down into carcinogenic elements, namely nitrosamines. The European Union has banned the use of DPA in 2012. They set the maximum allowable limit of DPA on apples to 0.1 parts per million (ppm). Nonetheless, DPA residues with an average reading of 0.42 ppm have been found on over 80 apple samples imported from America, which is well over the maximum allowed limit. Thus, the EU is banning apples from America, until the readings are found to be in accordance with the regulation (Lunder, 2014). Although the US EPA and World Health Organisation (WHO) found that long-tern exposure to DPA is unlikely to cause a public health concern, the EU maintains that absence of evidence of harm is not a strong enough indicator. The EU claims that there is insufficient testing regarding DPA to prove that their products as well as chemicals formed are safe to be consumed when broken down. The main source of concern is the presence of nitrosamines. As DPA is the most common chemical used for apples preservation, the presence of cancer-causing nitrosamines should present a great concern. References Agency for Toxic Substances and Disease Registry (ATSDR). 2010. Addendum to the  Toxicological Profile for N-nitrosodiphenylamine. Atlanta : ATSDR- Division of Toxicology and Environmental Medicine   Lunder, S. 2014. Behind Europe’s Apple Chemical Ban.  http://www.ewg.org/enviroblog/2014/04/apples. Retrieved 21 October 2014. Bryan, N.S., Alexander, D.D., Coughlin, J.R., Milkowski, A.L. and Boffeta, P. 2012. Ingested  Nitrate and Nitrite and Stomach Cancer Risk: An Updated Review. Food and Chemical Toxicology 50: 3646-3665 Crews, C. 2010. The Determination of N-nitrosamines in Food. Quality Assurance and Safety  of Crops Foods 2(1): 2-12 Gilchrist, M., Shore, A.C., and Benjamin, N. 2010. Inorganic Nitrate and Nitrite and Control  of Blood Pressure. Cardiovascular Research: 1-7 Hebels, D.G.A.J., Brauers, K.J.J., van Herwijnen, M.H.M., Georgiadis, P.A., Kyrtopoulos, S.A., Kleinjans, J.C.S., and de Kok, T.M.C.M. 2011 Time-Series Analysis of Gene Expression Profiles Induced by Nitrosamides and Nitrosamines Elucidates Modes of Action Underlying their Genotoxicity in Human Colon Cells. Toxicology Letters 207: 232-241. Herrmann, S.S., Duedahl-Olesen, L. and Granby, K. 2015. Occurrence of Volatile and Non-Volatile N-nitrosamines in Processed Meat Products and the Role of Heat Treatment. Food Control 48: 163-169 Larsson, S.C., Bergkvist, L., and Wolk, A. 2006. Processed Meat Consumption, Dietary  Nitrosamines and Stomach Cancer Risk in a Cohort of Swedish Women. International Journal of Cancer 119: 915–919. Levallois, P., Ayotte, P., Van Maanen, J.M.S., Desrosiers, T., Gingras, S., Dallinga, J.W., Vermeer, I.T.M., Zee, J., and Poirier, G. 2000. Excretion of Volatile Nitrosamines in a Rural Population in Relation to Food and Drinking Water Consumption. Food and Chemical Toxicology 38: 1013-1019. Loh, Y.H., Jakszyn, P., Luben, R.N., Mulligan, A.A., Mitrou, P.N. and Khaw, K.T. 2009. N-nitroso Compounds and Cancer Incidence: The European Prospective Investigation into Cancer and Nitrition (EPIC) – Norfolk Study. American Journal of Clinical Nutrition 93: 1053-1061 Mestankova, H., Schirmer, K., Canonica, S. and von Gunten, U. 2014. Development of  Mutagenicity During Degradation of N-nitrosamines by Advanced Oxidation Processes. Water Research 66: 399-410. Ravnum, S., Runden-Pran, E., Fjellsbo, L.M., and Dusinska, M. 2014. Human Health Risk Assessment of Nitrosamines and Nitramines for Potential Application in CO2 Capture. Regulatory Toxicology and Pharmacology 69: 250 – 255. Shibamoto, T. and Bjeldanes, L. Introduction to Food Toxicology, Second Edition. UK:  Academic Press: 267 Stuff, J.E., Goh, E.T., Barrera, S.L., Bondy, M.L., and Forman, M.R. 2009. Construction of an  N-nitroso database for assessing dietary intake. Journal of Food Composition Anal 225: 542-577