Ethics and Compliance

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Ethics and Compliance Paper
Matt Itter, Sarah Gustafson, Shane Bumgardner, Tanya Baker, Adam Caldwell Fin 370
August 6, 2012
Christopher Hernandez

Ethics and Compliance Paper
Team B has chosen to analyze the annual filings for Lowe’s Companies Inc. In this paper we will go over the last two years of SEC filings for this company and we will analyze the information provided by those reports. Team B will look at the role of ethics and compliance in the company’s financial environment, we will discuss the procedures that are in place to ensure ethical behavior, we will also take a look at the financial market in the United States that this company operates in. Lowe’s must also ensure that it follows all SEC regulations in order to operate properly in the financial markets within the United States. Lastly Team B will evaluate the last two years of financial statements for Lowes Companies Inc and using financial ratios, calculate the ratios for each year in several categories. This will help Team B determine the financial health of Lowes Companies Inc. Ethics and Compliance in the Financial Environment

Lowe’s has many practices and procedures in place to ensure financial sustainability. Board members make decisions based on the best interest of the company and the shareholders not the individuals. Committees have been established to audit expenses, salaries, and the practices of the board to ensure ethical decisions are being made to keep Lowe’s financially stable and profitable. Every employee, while acting on behalf of the company, must comply with all applicable governmental laws, rules and regulations, and should avoid engaging in any conduct that, even though legally permissible, is inconsistent with the ethical principles to which Lowe's subscribes (Lowes 2012).

Ensuring Ethical Behavior
Employees participate in a certification each year to maintain Lowe’s Code of Conduct. Each employee must report any unethical behavior witnessed or any indication the behavior might occur. Lowe’s board of directors consists of twelve members. The board governs the company to ensure success of the company and follow ethical guidelines. The board’s main responsibility is to make ethical and strong business decision while keeping the best interest of the company and the shareholders in mind. All members must convey any possible conflict of interest in regards to any matter of business. If a conflict arises the board member must refrain from voting on the particular issue at hand related to the conflict. Lowe’s board of directors also consists of an Audit Committee, Compensation Committee, Executive committee, and Governance Committee to ensure all aspects of the business are being ethically managed. The committees evaluate the board along with the practices and decisions made by the members.

Financial Markets in the United States
Financial markets in the United States are made up of borrowers, savers, and financial institutions. The financial markets facilitate the movement of money between these three groups. The financial market is the place where a business can sell securities in the form of short-term investments in money markets or long term financial instruments in capital markets (Titman et al, 2011). The financial market involves an investor exchanging money for a financial instrument and a borrower such as a corporation receiving the necessary financing and then paying the investor in the form of dividends and hopefully a return on the investment. The securities market consists of the debt market and the stock market. Financial intermediaries such as commercial banks, finance companies, insurance companies, investment banks, and investment companies help bring the investors and borrowers together (Titman et al, 2011).

The securities market consists of the primary and the secondary market. The primary market issues new securities which have never been bought or sold and the firm issuing the security...
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