Board Oversight of Corporate Ethics Programs and Disclosure Transparency

<p> For a number of years, groups such as the Jenkins Committee and the SEC have taken steps to make corporate activities more transparent to investors. In addition, the Sarbanes&hyphen;Oxley Act requires publicly traded firms to disclose whether they have adopted codes of ethics for their senior financial officers. An implicit assumption is that ethics codes will help firms develop more transparent disclosure policies by enhancing their internal control environments. However, past research (Felo 2000) provides evidence that board involvement in the development, implementation, and maintenance of codes is an important factor in whether ethics codes are related to stronger internal control environments.</p><p> Using results from Standard and Poor's survey of transparency and disclosure (Patel and Dallas 2002), I find that firms having ethics programs overseen by their boards disclose more overall information, financial information, and board and management information than do other firms. Additionally, they are more likely to disclose information recommended by the Jenkins Committee and to voluntarily provide information recently mandated by the SEC. Although my evidence only demonstrates an association between board oversight of ethics programs and disclosure transparency, it does support mandating greater board involvement in corporate ethics programs as a way to enhance corporate disclosure transparency.</p>