Impact of Taxation Laws and Denying Contracts on Corporate Governance Practices

Accounting Reporting and Professional
Practice

TABLE OF CONTENTS
Table of Contents.......................................................................................................................2
QUESTION 1.............................................................................................................................3
Part A.....................................................................................................................................3
Part B......................................................................................................................................5
Part C......................................................................................................................................7
QUESTION 2...........................................................................................................................10
History and background of Islamic accounting...................................................................10
Islamic Accounting in Modern Era......................................................................................10
Islamic Code of Ethics.........................................................................................................11
Importance of Code of Ethics..............................................................................................11
The Role of Islamic Accounting in Promoting Ethics.........................................................12
QUESTION 3...........................................................................................................................12
Part A...................................................................................................................................12
Part B....................................................................................................................................15
QUESTION 4...........................................................................................................................18
Part A...................................................................................................................................18
Part B....................................................................................................................................20
REFERENCES.........................................................................................................................24

QUESTION 1
Part A
The existing level of pay for the Chief Executive Officer in America are considered as more
offensive, and the pay practices of CEO in US corporate have been in the main concentration
for many years. At the same time, executive compensation has been a buzz in the managerial
authorities for years; it has currently been considered more by the public policymakers.
Corporate with an incline towards offering long-term incentive will have a higher average
pay term from those who compensate the majority of their incentive in the absence of
deferrals(Alex,2016).
Indeed, the genuine rewards are more justifiable while a company shows solid long-term
growth. On the other hand over the last decade, the association between the CEO pay and the
company performance has been complex to discern. The current financial crises have formed
a public uproar on the pay packages on the top-executives and have demanded for executive
pay reforms in the US. Further, such controversy has forced that the executive pay has shed
light on outrage and caused regulation in the US (Peter, 2018).
By considering the statistics of executive remuneration over the years, significant raise can be
noticed that excessive stockholder authority is clearly what led to the short-term fixation
causing the latest financial crises. Since the stockholder authority is increasing over the last
two decades, by this the stock market has also rapidly been institutionalized (Alissa, 2015).
Further, the broad gap of pay might make the overall procedure complex to stimulate the
required teamwork by the business in order to gain success.
The pay metric’s average term will be effective in offering a clear aspect to make a
comparison of the pay plans of the company that would be highly beneficial for the
employees, shareholders, board and company as a whole (ELEANOR, 2011). Furthermore,
this will also offer a reference point in regards to the suitable risk management and firm
investment.
It can be said that such metrics might be appropriately suitable as per the requirement, as
these metrics will assist company and board to reconsider the inflexible compensations and
associated managerial issues that have dig companies for several decades. In this way, such

metrics will also provide possible employees and shareholders with the information to make
better decisions about the investment and their next working.
The main challenge comes when non-considering the long-term incentive pay, is that they
were established for the reason to align the pay results of executives with the experience of
shareholder and are renowned among most of the shareholder (Correa and Lel, 2016). The
U.S companies, there is a fight for the power and control, over the last twenty years, boards
of directors have possessed higher authorities. In this sense, the situation has altered in an
essential manner. In real aspects, it can be said that general boards have gained a better
position on their companies.
In this regards, it can be articulated that companies are required to consider the reform law
that is inclusive of a provision that needs each and every US companies to do reporting on an
annual basis among their CEO compensations and the median pay that will be given to the
workers. This will be effective in making a vital decision regarding the basic pay structure of
executive and maintain proper disclosures with better justifications (Ntim and et al., 2015).
This will also encourage compensation disclosure, and demand for the disclosure rules held
on the executive and their compensations to be explicit regarding compensation and all the
aspects of executive inclusive of retirement compensations and all other benefits.
In addition to this, the proposal will offer support in federal contract bidding to the
corporations that makes payment to their executive lower than 100 times what is paid to the
workers. It would be effective in terms of creating a threshold for the upper limited to
executive remuneration and make sure that the executive person is not charging more than
statutory limits(Fisch, Palia and Solomon, 2018). Additionally, government contracts that do
discrimination must be denied by companies, in terms of gender and caste in their practices of
employment, as companies must not involve such inequality in their tax dollars subsidizing.
The main rationale of considering is that to ensure fair pay among executives by considering
factors such as skills and qualifications instead of considering factors that can lead to unfair
discrimination.
In current times, executives followed the paycheck jackpots that are engaged in the practices
that can put the companies in risk, for example, toxic security as well as job-killing measures.
To this note, it is stated that it is not worthy to give all the responsibility to the shareholders
on the executive pay decisions, it is because shareholder have ultimate authorities but
generally all shareholders are not aware of their rights and responsibility thus there should

mix of government regulation and shareholder authorities for better governance of executive
remuneration
In this case, to make it effective, companies must begin with a distinct assumption that is
their tax dollars must never subsidize executive excess (Kimbro and Xu, 2016). At, present
the companies can make a deduction from their income tax from those who lavish in terms of
their execs.
Further, the law and policy makers encourage companies to make policies on the basis of the
limited share to their shareholders, as the use of limited shares can ease such opportunities
that are provided to all employees, instead of the small number of executives (Abernethy,
Kuang and Qin, 2014).By encouraging, employee ownership will be widened,andcorporate
must consider if or if not the incentive based on performance and other benefits must not be
provided on an equivalent basis to each and every employee.
Part B
Provided assumption on the given statement that, ‘ the effectiveness of developed reform is
based on the act of shareholders’, is reasonable it is because shareholders have ultimate
authorities therefore if they act on prudent basis then they can control the operations of
business activities. However, effective shareholder control is a theoretical concept because in
practical terms there are several barriers to this that could be determined to the governance
company as a whole(McCahery, Sautner and Starks, 2016).
By considering this, following are the factors that act as barriers to the effective shareholder
control: with the rapid increase in the equity ownership, the institutional investors have been
a call to as a potential solution to issues in governance with the capability to make reduction
the managerial power. On the other hand, there is a list of barriers that reduce the
effectiveness in such specific governance (Lebedeva and et al., 2016). These barriers are
inclusive of and take place from, the business investor relationship with an organization
wherein invest, in which investment is made, the excessive government regulation that limit
the investor activities and restriction on their capability to such information processing
needed to manage the firm.
There are several barriers that arise from business relationships, the major aim of the majority
of the shareholder is to gain an investment return in firms, additionally to such role in
investment, a certain institution might possess business relationships wherein they obtain

shares from firms. For such institutions, some proportion of their revenue is based on the
firm’s economic exchanges from their shareholdings (Mason and Simmons, 2014).
Therefore, the increase in investment value potential by active intervention might be
invalidated by the business loss in the firm. As the capability of the institution to impact the
firm will be restricted to the scale to which it is based on the firm.
In this way, the investors, therefore, suffer from the dilemma, which is that the intervention
might case to a net reduction in value. In this way, institutions that intents to manage an
agreeable business relationship might hesitate to call for managerial actions. It is highly
significant to realize that that the direct practice of the voting rights overall possible only by
means of proxy voting (Iliev and et al., 2015). On the other hand, without regulatory barriers
with the comparative ease by which shareholders assemble to against management while
offering them tactic authority and the same can be practised in the absence of resort to voting.
These regulation limit investors in two key ways, one is by restricting their ownership of a
stake in firms and second is by posing key barriers to the mutual actions in the investor's
group.
The barriers are arising information processing restrictions, in ideal terms, corporate
governance is required to provide a prior warning and caution to keep the organization on
track before any of the crises take arises. If an institution is capable of being reasonable
corporate governance means, they are capable of determining crises before itoccurs. This
involves the capability to mobilize process and analyze information to determine possible
problems (Boivieand et al., 2016). Thus, the shareholders should attempt to forma control
system for each and every firm within their portfolio for easing the execution of changes
needed to accept any examined deviations held from strategic actions. In regards to these
considerations, the shareholders claim that firm targeting is an element of an over bending
strategy to offer effective governance for firms within their portfolio (Gilson and Schwartz,
2015). Another restriction of the strategy of the targeting is that it might result in value
maximization conduct on the managerial part. Instead, they might consider a satisfying
strategy which is the managers might consider strategies to manage a viable performance
level.
The managerial authority domination also acts barriers as it creates possible conflicts as
managers possess opposing preferences and interests. At the same time, there are means of