Ethics and Compliance Analysis
FIN375 – Business Finance

Ethics and Compliance Analysis The Lowes Company was established in 1921 by L.S. Lowes as a local hardware store selling products such as power tools, electronics, paint, lawn care products, as well as other forms of hardware products. Later L. S. Lowes passed away and L.S. Lowes’s son and son -n –law took over the company later selling most of the merchandise to reorganize the store allowing the store to sell both hardware and building supplies (Lowe’s Companies, Inc, 2010). Selling both hardware and building supplies allows the company to be more flexible attracting a larger more versatile customer base and expanding the number of stores throughout the word to over 400 store locations (Lowe’s Companies, Inc, 2010). The following will discuss their code of ethics, compliance with SEC regulations, and an evaluation of the company’s financial status.
Code of Ethics
The Lowes Company has a policy of adhering to a stick code of business conduct and ethics which are designed by a series of people on the Board of Directors which are not employed by the Lowes Company. The ethical behaviors required by the Lowes Company are to be followed by all employees of the Lowe’s Company both internal and external employees (Lowes, 2010). The rules of the policy include: compliance with laws, and regulations, conflict of interest, fair dealing, corporate opportunities and loyalty, confidential information, social networking media and collaborative networking technologies, payments to governmental officials or other persons, importance of accurate books and records and adherence to system of internal control to financial reporting , protection and proper use of company assets, public company reporting , insider trading, intellectual property, employee relations, compliance with code, amendment, modification, and waiver. The first ethical behavior required by the Lowes Company is to follow all government rules, laws, and regulations. The rules, laws, and regulations are provided to each employee by the management team of the Lowe’s Company (Lowes, 2010). If there were to be any questions regarding any of the various rules, laws or regulation The Lowe’s Company requires the individual to seek guidance from the companies general counsel or chief compliance officer (Lowes, 2010). The next form of ethical behavior is conflict of interest. The conflict of interest includes anything started at work or started outside the work place. The forms of conflict of interest are shown by forms of disagreement or by ones appearance (Lowes, 2010). Fair dealing is another form of ethics which Lowes expects their employees to follow. The fair dealing that the people of the Lowes corporation practice is to treat all employees, customers and suppliers with due forms of respect and honesty. When dealing with others Lowes wants everyone to treat others how they would like to be treated (Lowes, 2010). The forth form of ethics is corporate opportunities and loyalty which the employee agrees to not take other jobs which may compete with the Lowe’s Company. Other forms of opportunities and loyalty include employees not taking the job at Lowes as a personal benefit for themselves or family members. The employees are required to seek the best interest for the company (Lowes, 2010). The fifth form of ethics is confidential information which the company expects all employees to keep all company, contractor, and customer information private. All company information will need to remain secret based on the various rules, laws and regulations that will be violated if others found out the confidential information causing many lawsuits (Lowes, 2010). The sixth form of ethic’s that the Lowe’s Company complies with is social networking media and collaboration network technologies. The meaning of this is that no employee can discuss confidential information through any social network such as media, or any social websites unless approved by the board of directors (Lowes, 2010). The payments code of ethics prevents all employees of taking bribes of any sorter whether the bribe comes from a customer, employee or any other form of individual or individuals who try to get discounts or free item against the Lowes Company request (Lowes, 2010). Another form of ethics include all forms of financial information in which the company focuses on related to their finances such as precise books, report and adherence to system of internal controls to financial coverage. The financial information required by the Lowes Company follows all Lowes ethical requirements and ensures all information in the financial statements are true documents (Lowes, 2010). Another form of ethics is to properly secure all assets with little or no waste to the company, ensuring no public information regarding the Lowe’s company is revealed based on the various federal acts, taking forms to avoid insider business, all employees must ensure all ideas , materials and services are kept confidential to only Lowe’s team members (Lowes, 2010). Lowe’s also ensures all employees are treated equally regardless of nationality, religion, age, gender, origin, handicap, or sexual preference. Thus understanding the company treats all employees equal and expects all employees to act in a professional manner in the work surroundings. If any secured information is shared which others one may inform his or her supervisors, the Lowe’s Companies open door phone line on the information shared with yourself or others (Lowes, 2010). The final ethical code is the amendment, modification and waiver. The amendment, modification, and wavier is designed to change the already existing code of ethics. This modification can be changed based on the board of director’s recommendations (Lowes, 2010).
SEC Regulations Several of the processes that Lowes have established in order to comply with the Securities and Exchange Commission (SEC) is to prepare the Audit Committee report as required by the rules and regulation of the Securities and Exchange Commission which is included in its Company’s annual proxy statement. In order to accomplish this task, an Audit Committee has been established by the Board of Directors of Lowe’s Companies incorporated. This committee is independent and has the responsibilities of assisting the Board in monitoring the following: (a) ensuring the integrity of the company’s financial statements, (b) the company’s legal and regulatory compliance, (c) the company’s independent auditor qualifications and independence, (d) the performance of the company’s internal audit function and independent auditors, and (e) compliance by the company with its established internal controls (Lowe’s, 2010). In addition, this committee shall consist of at least three directors. Each of these appointed directors shall qualify as “independent” under all policies and regulations of the New York Stock Exchange (NYSE), Section 10A (m)(3) of the Securities Exchange Act of 1934 and rules and regulations of the SEC. With one member of this committee qualifying as a “financial expert” as defined by the SEC rules. This group of individual shall have an unrestricted access to all personnel records, operations, properties and other informational sources of the company as required to properly discharging its responsibilities. These groups of individual are also authorize to investigate any activity of the company and all its employees and are authorize to retain and pay outside counsel and other advisors if it requires outside assistance in fulfilling its responsibilities. The committee may delegate authority in granting pre-approvals of engagements related to the audit of the company and all other engagement permissible under the Exchange Act, with the exception of the annual audit to be performed by the independent accountant. Nevertheless, this committee does have some limitation in its responsibilities to the company. It may not plan or conduct audits or to determine the company’s financial statements. It may also not disclose any complete and accurate information to the public, which falls under the responsibility of management and the independent auditor. Another ways of compliance indicator of the Company to the Securities and Exchange Commission regulations is its submission of the 10K report, which is the company’s annual report concisely. This report is submitted to the SEC in accordance with the pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Other reports that Lowe’s submit in accordance to SEC rules and regulations are the audit report, Schedule 5 (Property, Improvements and Equipment Annual Report), Schedule 6 (Accumulated Depreciation and Amortization Report), Balance Sheet, Cash flow and Income Statement. All of theses reports must comply with the SEC’s guidance and standard procedure when submitting (Lowe’s, 1994).
Financial Analysis
Ratio 2010 2009
Current Ratio 1.32 1.15
Debt 0.27 0.34
Return on Equity 9.63 12.89
Receivables Turnover 3.74 4.01

The trend for the current ratio indicates an increase. This means the company now has 0.17% more assets to their liabilities. The higher this percentage is, the greater the relationship is between a company’s current assets and current liabilities. In contrast, if this percentage is lower the relationship is worse. The trend for the debt ratio has lowered indicating a lower total debt to total assets. This number is a percentage indicating that Lowe’s has 27% of their total assets tied-up in debts, which is better than the prior year. The ROE ratio indicates that Lowe’s has less net income to common equity this year than last year by 3.26%. This means the company may be inclined to investigate ways into creating an increase again in this area. The receivables turnover ratio compares the credit sales to the accounts receivables. It is expressed in times-per-year. This means Lowe’s improved their receivables turnover per year. In conclusion, Lowe’s has adopted a strict code of ethics policy to cover a very wide base of offences. They have also set many company policies in place to ensure they stay in compliance with SEC regulations. Based on the financial analysis, while there are areas that need improvement, the over all company is doing quite well. References
Lowe's. (1994). SEC Information. Retrieved from http://www.secinfo.com/d1R7k.bz.a.htm
Lowe’s, 2010. Code of Business Conduct and Ethics. Retrieved on October 18, 2010 from http://investor.shareholder.com/lowes/documentDisplay.cfm?DocumentID=3627
Lowe's, (2010). Audit Committee Charter. Retrieved on October 17, 2010 from http://investor.shareholder.com/lowes/documentdisplay.cfm
Lowe’s Companies, Inc, 2010. Lowe’s Companies, Inc website visited October 18, 2010. Retrieved from http://www.fundinguniverse.com/company-histories/Lowes-Companies-Inc-Company-History.html