Good Research Paper About Ethics And Compliance For Lowe’s Corporation

Type of paper: Research Paper

Topic: Company, Corporation, Finance, Business, Conformity, Compliance, Investment, Ethics

Pages: 5

Words: 1375

Published: 2020/12/08

Role of ethics and compliance in the financial environment of Lowe’s

Corporate ethics and compliance with set regulations is critical for sound financial management in any organization. Lowe’s maintains high standards of corporate ethics and has developed a Code of Business Conduct and Ethics to be adhered to by the top management, employees as well as other parties it transacts business with. The corporation is also subject to the regulations set by the Securities and Exchange Commission. Such rules are meant to ensure the accuracy of financial statements, accountability and integrity in the management of corporations. Lowe’s has complied with these regulations by forming a competent board of directors. The board of directors is committed to high levels of integrity. The board constructively engages with the management and shareholders of the company and enhances compliance with the corporation’s code of ethics.
The compliance with corporate ethics has enabled the firm to maintain high standards of integrity. In addition, compliance with SEC rules has ensured accountability and accuracy of financial statements presented to the shareholders. Furthermore, compliance with tax regulations, among other statutory regulations has enabled Lowe’s to avoid government red tape. It has earned its reputation through compliance with regulations as well ethical standards. Transparency and accountability to shareholders allow the company to foster a harmonious relationship with its shareholders. Shareholders of the company have entrusted the management and the board to run the company on their behalf. Violations of ethical standards can easily lead to the loss of trust and reputation of the corporation. This will in turn affect its revenues, performance of its stock in the exchange market, capacity to access credit, among other aspects. Its strong ethical standards and compliance with corporate governance principles have prevented cases of corporate fraud. The above factors have led to smooth and efficient operations thereby resulting in its success.

Procedures Lowe’s has put in place to ensure ethical behavior

The company has established and implemented a Code of Business and Ethics. The code has outlined procedures to ensure that all stakeholders comply with the set standards. One of the most crucial facets of ethics is conflict of interest. To avoid conflict of interest, Lowe’s prohibits any employee or family of the employee from having any personal financial dealings with any organization or individual doing business with the company (, 2015). In addition, an employee is not allowed to act on behalf of Lowe’s in a transaction involving Lowe’s and an organization in which the employee has a financial interest. The rule also applies to the directors of the corporation. Employees together with their immediate families are also not allowed to give or accept gifts from persons conducting or seeking to do business with the company.
In order to prevent corporate fraud, Lowe’s has a requirement that no disbursements can be made without proper recording in the books (, 2015). As such, any claim any receipts from customers as well as payments to vendors can only be authorized upon the verification of the invoices. The code also has a section on Protection and Proper Use of the Company Assets. It requires all employees and directors to use assets efficiently and avoid wastage and theft of resources.
Lowe’s furnishes every employee and vendor or customer with a copy of its Code of Business and Ethics to ensure that all parties understand each of the requirements. It also enhances compliance by attaching punitive measures to non-compliance (, 2015). Employees who violate this code may be terminated, fined or subjected to criminal sanctions by the regulatory authority. Organizations doing business with Lowe’s are required to comply with and support the policy. Violations lead to termination of business relationships with Lowe’s. Finally, Lowe’s has established the Office of the Chief Compliance Officer. Members can report any violations to the office.

Processes for compliance with SEC regulations

Lowe’s, as a publicly traded company, has the mandate of filing annual and quarterly reports with the Securities and Exchange Commission. The Commission also requires publicly traded corporations to comply with the principles of corporate governance. These regulations are aimed at enhancing the accuracy of financial statements, accountability and integrity in the management of companies. They also aim at ensuring the interests of all stakeholders of the company are taken into consideration.
Lowe’s compensation committee has been essential in determining the remuneration of its directors and managers. It prevents conflicts of interest that could arise when executives have the power to determine their salaries (, 2015). It has also ensured that the compensation of the top executives is linked to performance thereby improving the performance of Lowe’s. It also has an independent governance committee that has ensured there are no interferences to the appointments of members to the board. The committee evaluates the performance of directors, as well as the Chief Executive Officer and is also responsible for establishing governance policies and processes.
Lowe’s complies with SEC regulations through its board of directors that has been set based on the principles of corporate governance. The board ensures the company complies with the rules by enhancing accountability and transparency, and ensuring that the company files the documents required by statutes. The Office of the Chief Compliance Officer also helps in monitoring compliance of the firm with SEC rules and advising the management on measures to improve compliance.

Financial analysis

As at 31 January 2014, the current ratio for Lowe’s was 1.16 indicating that its total current assets were 1.16 times its total current liabilities. This indicates that Lowe’s had adequate current assets to pay its current liabilities (Drake & Fabozzi, 2012). Therefore, the company did not have liquidity challenges as of January 2014. The same current ratio was 1.263 as at February 1, 2013. The current ratio fell by 8.61% indicating that the liquidity of Lowe’s decreased in the year ended January 31, 2014.
Lowe’s debt ratio as at 31 January 2014 was 0.6379. This indicates that Lowe’s financed about 63.79% of its total assets through borrowed funds. This implies that the solvency is low since the debt ratio is more than 50%. It could indicate a higher financial risk in investing in the company’s stock. Shareholders’ funds financed a less percentage of Lowe’s total assets than the percentage funded by outsiders (Drake & Fabozzi, 2012). Lowe’s debt ratio for 2013 was 0.5758 implying that 57.585 of its assets were funded through borrowing. The ratio increased by 10.78% in the year ended 31 January 2014. An increase in debt ratio shows an increase in the proportion of total assets funded by borrowed finances. This indicates that Lowe’s solvency declined in 2014.
The return on equity for the year ended January 2014 was 19.29% implying that Lowe’s shareholders earned a net income of $0.1929 from every dollar of equity invested in the corporation during the year. A return on equity of 19% is high hence the company was profitable and generates a good return for its shareholders (Drake & Fabozzi, 2012). During the year to February 2013, return on equity was 14.14% showing that shareholders earned a net income of $0.1414 for each dollar of equity held in the corporation. The ratio increased by 36.42% indicating an improvement in the profitability of Lowe’s in the year to January 2014.
In 2014, Lowe’s day’s receivables ratio was 1.722 showing that it took the firm an average of 1.722 days to collect money from its receivables in the year to January 2014. An average of about two days is short hence the company is efficient in collecting its receivables. The ratio increased by 9.83% from 1.568 in the year ended February 2013. This indicates that the corporation’s efficiency to collect money from its debtors increased. This ratio has a bearing on the amount of cash available to finance operations. A shorter day’s receivables ratio reduces the likelihood of cash flow problems in the company.


Drake, P., & Fabozzi, F. (2012). Analysis of financial statements. Hoboken, N.J.: Wiley.,. (2015). Lowes Companies - Code of Ethics. Retrieved 5 March 2015, from

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