Reporting CFO resignation

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Introduction

The company is currently facing financial crisis following the sudden resignation of the Chief Financial Officer (CFO). As a result, the company needs to comply with the Security Exchange Act of 1934 and communicate the current situation to the public.

Business Case

The current problem facing the company is the vacant position for the CFO. With the unexpected resignation of the CFO, the company should follow the regulations established by the Security Exchange Act of 1934 to communicate the information to the public.

Recommendations

The Company should consider the following recommendations:

Legal Action

In reporting the case of CFO resignation, the company has to abide by the Securities Exchange Act of 1934. The company needs to file an item 5.02 of Form 8-K consistent with section 13 and 15(d) of the Securities Exchange Act of 1934 reporting the fact that the CFO resigned and the date of resignation. According to Form 8-K, the organization must deliver a copy of the actual disclosures to the CFO before reporting the findings to the public. In appointing a new CFO, the company will provide the following information to the public; the name and the position of the new Officer, and the date of appointment, information required by the regulations of Form 8-K and a short description of the contract.

Value of Public Communication

A public communication strategy is required in order to address the current situations facing the company because, accurate and timely information is important in any public organization (Lin, 2009). Furthermore, disclosing to the public on the resignation of the CFO will inspire and sustain individual investor’s self-assurance in the security trading market. Effective communication of the resignation circumstances will improve the Company’s reputation and credibility since the position of the CFO is significant to the growing number of shareholders today (Lin, 2009).

Balance between Calming Stakeholders and Ethical Considerations of SEC

In terms of ethical considerations, the Securities Exchange commission (SEC) requires the Company to create fair and timely disclosures of CFO resignation information to the investing public (Lin, 2009). Therefore, the stakeholders must be confident that Company observes the ethical considerations of the SEC in order to avoid conflicts of interest and abuse of power. The organizational management system, structures, procedures, and practices are well developed to avoid ethical problems of stakeholders. Essentially communication ethics, which will be achieved through public communication, plays the main function in the ethical dimension of the Company behavior.

How Perception of the Press Affects Public Opinion

Following resignation of the CFO, public opinion has the power to develop or damage the organization’s reputation and potential for success. To influence the public opinion on the resignation issue, the company decided to release the information to the press. Cheng and Seeger (2012) argue that press release enhances openness and transparency, which are fundamental to stakeholders. The press release by the company will positively change the public perception on the accountability of the organization. Therefore, press release will be an effective public relations strategy that will boost the company reputation, investment opportunities, and profitability by targeting the public

Conclusions

As a public company, it bears the responsibility of reporting the current situation of the CFO resignation to the public. The company will thus file the Form 8-K under Securities Exchange Act stating the facts and date of resignation.

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  1. Cheng, S. & Seeger, M. (2012). Lessons learned from organizational crisis: business ethics and corporate communication. International Journal of Business Management, 7(12), pp. 74-86
  2. Form 8-K. Retrieved from: https://www.sec.gov/about/forms/form8-k.pdf
  3. Lin, T. (2009). Undressing the CEO: disclosing private, material matters of public company to executives. U. of Pennsylvania Journal of Business Law, 11(2), pp. 383-426
  4. Securities Exchange Act of 1934. Retrieved from: https://www.sec.gov/about/laws/sea34.pdf
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