Corporate Governance and Finance Report: ABM Industries Inc. Analysis

This report provides a critical review of ABM Industries Inc.'s corporate governance, focusing on key aspects such as board and executive management, auditor independence, and the implications of the CEO/Chairman split. The analysis draws upon annual reports, examining the roles and responsibilities of key personnel, including the Chairman of the Board and the President/CEO. The report scrutinizes the independence of the company's auditors, KPMG LLP, and the potential impact of tax audits on financial statements. Furthermore, it assesses the impact of separating the CEO and Chairman roles on corporate governance, highlighting the benefits of enhanced monitoring and a clearer division of responsibilities. The report references specific sections of the annual reports, including those related to executive compensation and shareholder meetings, to support its findings and conclusions about the company's financial practices and governance structure.

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Managing Finance
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Table of Contents
Introduction......................................................................................................................................2
Critical review of board and executive management with in matters of CG...................................2
Critical review of independence of the auditors of the company....................................................3
Rational for the position of CEO and chairman are split and its implication on CG of the
company...........................................................................................................................................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

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Introduction
ABM Industries Inc., founded in 1909 by Morris Rosenberg is recognized as a facility
management service provider based in United States. Visit on the present standings the business
is known for one of the main capacity management service provider employing over “100,000
employees, over 300 offices, and 20 international locations”. Some of the most eminent services
of the company includes “facility services, building maintenance services and outsourcing of
services to other companies”. “ABM industries” primarily incorporated its services for industrial,
commercial, “retail clients and government across international locations and United States”
(ABM, 2018).
The study aims to show a critical review of board and executive management of the
company with regards to matters pertaining to Corporate Governance (CG). The second aspect
has shown a critical review of independence of the auditors of the company. In addition to this, it
has discussed whether the position of CEO and chairman are split and its implication on CG of
the company.
Critical review of board and executive management with in matters of CG
Based on the Annual report published in 2016, the information pertaining to the officers
are “found in Part I, Item 1 of this Form 10-K under” “Executive Officers of Registrant.”
Moreover, that additional “information set forth under captions” “Proposal No. 1—Election of
Directors,” “Corporate Governance and Board Matters,” “Audit-Related Matters,” and “Section
16(a) Beneficial Ownership Reporting Compliance” (Dias, Rodrigues & Craig, 2017). The
information on “executive compensation is incorporated” as per the reference from the
information set forth by “Director Compensation,” “Executive Compensation,” and “Corporate
Governance and Board Matters”. The schedule for holding annual meeting of the shareholders
was done on March 8, 2017 (Files.shareholder.com, 2018).
As per the evaluation of annual report published in 2015, information about executive
officers is found in “Part I, Item 1 of Form 10-K under” “Executive Officers of Registrant.”
However, the main changes identified with additional information which is set forth as per the
captions “Items to be Voted On—Election of Directors,” “Corporate Governance and Board

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Matters,” “Audit-Related Matters,” and “Section 16(a) Beneficial Ownership Reporting
Compliance”. In the latest year the company has used “Proposal No. 1—Election of Directors,”.
In a similar way, the executive compensation was incorporated with the referenced information
under “Director Compensation for Fiscal Year 2015,” “Executive Compensation,” and
“Corporate Governance and Board Matters” in the 2016 Proxy Statement. The schedule for
holding annual meeting of the shareholders was done on March 9, 2016 (Investor.abm.com,
2018).
Critical review of independence of the auditors of the company
“KPMG LLP”, an “independent registered” “public accounting firm”, has reviewed the
“consolidated financial statements” included the “Annual Report on Form 10-K” and, as part of
their “audit, has issued their report” and included several provisions on efficiency of “internal
control” over financial reportage. Based on the information published in the annual report of
2016 the auditors of ABM industries are subject to conduct tax audits by government authorities
across United States and United Kingdom. In case, the company experiences any unfavourable
result then one or more such tax audit may adversely impact the taxes and net income. In case of
any unfavourable income tax settlement, as per suggested by the audit report, the company may
need to use the cash and increase effective tax rate is on period of settlement (Hahn & Lasfer,
2016). In addition to this, as per the report of independent registered “public accounting firm”,
the audit of the company has accompanied the preparation of consolidated balance sheets thereby
depicting “shareholders equity and cash flows” for each individual year. The audit of the
consolidated financial statement also includes the examination of test basis indication supporting
and the amount of disclosures made in the financial statements along with valuation of the
“accounting principles” used with significant evidences is supported by the management and
used for overall evaluation of the financial statement presentation. In addition to this, the audit of
the internal control has obtained important information on considerate of “internal control” over
financial reporting, risk assessment and material risk. Some of the other significant areas of audit
has also performed procedures which were considered necessary in a circumstance (DeZoort &
Taylor, 2015).

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In a similar way, the evaluation of annual report published in 2015, has shown that the
registrants certifying officer has disclosed the independence of the auditor as part of the current
depictions of the financial reporting and IC and as per the statement published by board of
directors. In addition to this, the main independence of the auditor is viewed with “Certification
of Chief Financial Officer Pursuant to Securities Exchange Act Of 1934 Rule 13a-14(A) Or 15d-
14(A)” and “Certification of Chief Executive Officer Pursuant to Securities Exchange Act Of
1934 Rule 13a-14(A) Or 15d-14(A)” (Tepalagul & Lin, 2015).
Rational for the position of CEO and chairman are split and its implication on CG of the
company
As per information published in the annual report of 2016, Maryellen C. Herringer is
identified as “Chairman of the Board and Director” and Scott Salmirs as the “President and Chief
Executive Officer” of ABM Industries. Henceforth, it can be clearly identified that the position
of CEO and chairman are split up in the given situation. This has a significant integration on the
corporate governance strategy and distinction between the nonexecutives who are seen to be
independent and those who are not. The main implication of this on CG is further seen to be
based on better monitoring of the operations and ensure that the company is being run in
aggregation with the will of the shareholders. It further ensures that CEO is a administration
position which is responsible for driving these operational changes. A board based on
independent chair is more likely to be identified for monitoring areas of company which are
drifting from its mandates and the split up of the positions heads and ensuring that corrective
measures are taken (Duru Iyengar & Zampelli, 2016).
In a similar manner the information published in annual report of 2015, it is clearly stated
that Scott Salmirs is the “president and chief executive officer of ABM”. It is also noted that
there was no change in Maryellen C. Herringer being the “Chairman of the Board and Director”
as on December 17, 2015. Some of the other significant aspects of separation of leadership roles
helps in clear division of responsibilities which results in greater balance of power and authority.
It also confirms that no one individual has unfettered powers in decision-making. As the
chairman is not the “chief executive officer”, CG affairs of the company has been able to
maintain a strong and independent element on the board. In several situations, the separation of

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the roles may lead to aggression for the CEO which in turn may lead to unforeseen events
(Yasser & Mamun, 2015).
Conclusion
The discussion on review of board and executive management with in matters of CG has
clearly able to state that additional information was set “forth under captions” “Proposal No. 1—
Election of Directors,” during 2016, however in 2015 it was set forth as per the captions “Items
to be Voted On—Election of Directors,”. Critical review of independence of the auditors of the
company has been able to state “KPMG LLP”, an “independent registered” “public accounting
firm”, has audited the “consolidated financial statements” included the “Annual Report on Form
10-K” and, as portion of their audit, has issued their report and included several provisions on
effectiveness of “internal control over financial reporting”. The internal control has obtained
important information on “understanding of internal control over financial reporting”, risk
assessment and material risk.

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References
ABM - Annual Report. (2018). Investor.abm.com. Retrieved 2 March 2018, from
http://investor.abm.com/secfiling.cfm?filingid=1628280-15-9602&cik=771497
DeZoort, F. T., & Taylor, M. H. (2015). COMMENTARY––A Public Interest View of Auditor
Independence: Moving Toward Auditor Reliability When Considering and Promoting
Audit Quality. Accounting and the Public Interest, 15(1), 53-63.
Dhaliwal, D. S., Lamoreaux, P. T., Lennox, C. S., & Mauler, L. M. (2015). Management
Influence on Auditor Selection and Subsequent Impairments of Auditor Independence
during the Post‐SOX Period. Contemporary Accounting Research, 32(2), 575-607.
Dias, A., Rodrigues, L. L., & Craig, R. (2017). Corporate governance effects on social
responsibility disclosures. Australasian Accounting Business & Finance Journal, 11(2).
Duru, A., Iyengar, R. J., & Zampelli, E. M. (2016). The dynamic relationship between CEO
duality and firm performance: The moderating role of board independence. Journal of
Business Research, 69(10), 4269-4277.
Files.shareholder.com. (2018). Retrieved 2 March 2018, from
http://files.shareholder.com/downloads/ABM/6071404334x0x927234/B201F98C-E2D5-
4909-BED5-9A6C1A9C45A6/ABM_Industries_Annual_Report-Form_10K_Print.pdf
Hahn, P. D., & Lasfer, M. (2016). Impact of foreign directors on board meeting
frequency. International review of financial analysis, 46, 295-308.
Our Company | ABM. (2018). ABM. Retrieved 2 March 2018, from https://www.abm.com/our-
company/
Tepalagul, N., & Lin, L. (2015). Auditor independence and audit quality: A literature
review. Journal of Accounting, Auditing & Finance, 30(1), 101-121.

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Yasser, Q. R., & Mamun, A. A. (2015). The impact of CEO duality attributes on earnings
management in the East. Corporate Governance, 15(5), 706-718.