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Audit Committee vs. Compensation Committee

Which is more important to effective corporate governance: an audit committee or a compensation committee? Why? Explain your answer.

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While they are both important elements of good corporate governance, the audit committee would rank above the compensation committee. When we consider corporate governance, we are taking into account the various policies, procedures, and factors that control the internal environment of that company. Corporate governance became a main factor in the business arena due to the creation of the Sarbanes-Oxley Act, which was a result of the immense accounting scandals that took ...

Solution Summary

This solution explains if an audit committee or a compensation committee is more important to sound, effective corporate governance.