The Role of Sarbanes-Oxley and ISO 9001 in Corporate Management: A Plan for Integration of Governance and Operations

231 Pages·2011·5.63 MB·English

by  William A. Stimson

The Role of Sarbanes-Oxley
and ISO 9001 in
Corporate Management
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The Role of Sarbanes-Oxley
and ISO 9001 in
Corporate Management
A Plan for Integration of
Governance and Operations
WILLIAM A. STIMSON
McFarland & Company, Inc., Publishers
Jefferson, North Carolina, and London
LIBRARYOFCONGRESSCATALOGUING-IN-PUBLICATIONDATA
Stimson, William A.
The role of Sarbanes-Oxley and ISO 9001in corporate
management : a plan for integration of governance and
operations / William A. Stimson.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-7864-6657-3
softcover : 50# alkaline paper
1. Corporate governance—United States. 2. Production
management—United States. 3. Quality control—
Standards—United States. 4. Corporate governance—
Law and legislation—United States. 5. ISO 9001 Standard.
6. United States. Sarbanes-Oxley Act of 2002. I. Title.
HD2741.S777 2012
658.4'013—dc23 2011040289
BRITISHLIBRARYCATALOGUINGDATAAREAVAILABLE
© 2012 William A. Stimson. All rights reserved
No part of this book may be reproduced or transmitted in any form
or by any means, electronic or mechanical, i ncluding photocopying
or recording, or by any information storage and retrieval system,
without p ermission in writing from the publisher.
Cover image © 2012 Ricardo Alvarez. Front cover design by
Bernadette Skok ([email protected])
Manufactured in the United States of America
McFarland & Company, Inc., Publishers
Box 6¡¡, Je›erson, North Carolina 28640
www.mcfarlandpub.com
To the families of Leonard Moss of Aurora, Illinois,
and of Antoine Fauret of Saintonge, France:
If only they had known each other!
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T C
ABLE OF ONTENTS
Preface 1
1. Goodwill 13
2. Ethics in Business 16
3. Product and Service Liability 30
4. Contracts, Specifications, and Standards 40
5. Management Systems 51
6. Strategic Operations Management 64
7. The Sarbanes-Oxley Act 75
8. Managing Risk 90
9. Sarbanes-Oxley and Governance 100
10. ISO 9001 Framework for Sarbanes-Oxley 109
11. The Materiality of Operations 118
12. ISO 9001 Matched to SOX 132
13. The Governance System 151
14. Process Liability in Operations 167
15. Conclusions and Recommendations 188
Chapter Notes 201
Bibliography 211
Index 217
vii
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P
REFACE
In the year 2000, American industry witnessed large scale and wide-
spread theft of investment money. Millions of dollars disappeared into
private portfolios, much of it legally. These events contributed to a col-
lapse of the stock market and a furor among American investors and
workers. Thousands of persons lost everything—their investment, their
retirement funds, their savings for college education—everything their
families had depended on for the future.
In 2008, this shameful history was repeated with an even greater
magnitude of scandal and financial loss. Although these disasters seem
to be discrete events, they are really the extremes of a continuity of cor-
porate mismanagement across the spectrum of business activity. For
example, they are connected by the Ford-Firestone fiasco in the early
part of the decade that resulted in loss of life, hundreds of millions of
dollars in liability lawsuits and billions more in recall costs. They are
connected again by the more than 1,300 corporate fraud judgments
obtained by the Corporate Fraud Task Force of the United States Depart-
ment of Justice (DOJ) during the decade.1 And they continue today as
evidenced by the Toyota Motor Company’s recall of more than two mil-
lion vehicles with possible serious mechanical defects.
All of these events are complex, but it seems clear that there is a
common thread of mismanagement at the highest level. This has
increased the federal government’s interest in corporate governance and
has resulted in the Sarbanes-Oxley Act of 2002.
This book is about corporate governance, specifically the relation-
ship between the board of directors (the Board), responsible for gover-
nance, and corporate operations, responsible for getting things done.
The book is an outgrowth of my work over ten years as a forensic systems
engineer with the U.S. Department of Justice and of my 28 years as a
production auditor and consultant on production management. In this
1