Importance of logistics in supply chain management
- Logistics Management
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CVS health (NYSE: CVS), one of the most outstanding success stories in US healthcare, has seen rapid growth since its foundation. In these 50 years since its foundation, CVS health has achieved enormous presence and reach in US with its 7800 retail stores. Founded in 1964 by Stanley and Sidney Goldstein and Ralph Hoagland, the store was bought by Melville Corporation 5 years later. The company grew by acquiring other drug store chains and is there in nearly every state. In these 5 decades, CVS has grown at a very fast pace. It has opened its health stores in almost every state.
Particularly, its retail stores have proved to be the drivers of its growth. Today, CVS has become the nation’s biggest operator of health clinics and the largest dispenser of prescription drugs. It is also the second largest pharmacy benefits manager and drug store chain. CVS employs 199,000 employees. Its CEO is Larry J Merlo. Its 2015 revenue was $153,290 million and profits $5,237 million. By revenue, it is among the top ten brands in the Fortune 500 list at the seventh position.
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The Enron scandal and its collapse occurred in 2001. The scandal proved self-regulation and peer review were insufficient to maintain accounting ethics. As a result, the Sarbanes Oxley Act of 2002 was introduced. The Act came into force after a series of Congressional hearings on the Enron scandal.The scandal had shaken the public’s and investors’ confidence in the capital market, resulting in significant pressure on the Congress to act fast. Introduced in 2002, the Act brought some major changes to corporate governance and regulation of financial practice. SOX was named after the Senators Paul Sarbanes and Representative Michael Oxley who were the most important names behind SOX.
SOX introduced an important requirement- deadline for compliance. The entire Act is arranged into eleven titles. Of these titles, 302,401, 404, 409, 802 and 906 are of particular importance regarding compliance. The act, apart from being appreciated for its focus on accountability and compliance, has also been criticized widely. Many held that the act would lead to a loss of risk taking and competitiveness. However, whenever there is a comparison, the benefits of SOX have far outweighed its disadvantages. Some of the most important changes that the act introduced were targeted at the senior management and the top executives.
The primary aim of the Act was to improve the status of accountability inside the financial organizations. For this purpose, it was essential to target the people in the upper echelons of the organization. Particularly, the act holds the CEO and CFO accountable for several factors. The CEO and the CFOare required to officially certify the appropriateness of the financial statements and disclosures. They should also provide that these documents represent all the finances and operations of the firm fairly. The act also prohibits most types of personal loans to the CEO.
Limitations related to insider trading during certain events are also a part of the act. The Section 404 contains some of the most important requirements related to internal controls. This section requires the companies to assess the effectiveness of their internal controls related to financial reporting. Companies must report regarding this assessment in their annual fillings with the SEC. In case of the off balance sheet transactions there is a need for extra disclosure.SOX introduced certain criminal penalties related to several financial frauds. It increased the term for mail frauds from five to twenty years.
‘SOX’ has been effective and this was proved in the subsequent years. The number of ethical violations in accounting firms has reduced sharply. The condition of accountability in the finance industry has improved. However, along with these improvements the law created some pressures. SOX has also been an object of severe criticism due to it. The internal control mandate of SOX introduced some new costs that could be burdensome for the small companies. The changes the law introduced, resulted in compliance related extra burdens. It is the primary reason that the act has been criticized heavily. Yet, the Enron scandal had already proved that the compliance related requirements could be worth it. Apart from that another major area where the law was able to bring effective changes, was related to the strengthening of the audit committees and corporate governance.
The changes brought about by the SOX can be summed up as follows:
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