Aeropostale Inc. Corporate Governance

2. Reviewing the Governance of Aeropostale Inc.

Review of the corporate governance of any company is always appropriate. However, the poor financial performance of Aeropostale Inc. is the main prompt for reviewing its corporate governance practices. The corporate governance principles are enshrined in the legal and regulatory frame of the jurisdiction in which it operates.

Incorporated in state of Delaware, the Company is subject to Delaware General Corporation Law, the Securities and Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the NYSE rules, and the By-laws of Aeropostale Inc. (effective as of July 1, 2015). This jurisdiction (US) is based on the rule-based or mandatory compliance model of corporate governance as outlined in the

Having being incorporated, the Law now defines, in terms of corporate governance, how directors are appointed, the composition of the board, the qualifications of directors, boards committees, term and quorum, classes of directors, and the power and duties conferred on directors, inter alias.

Securities and Exchange Act of 1934

Securities Exchange Act of 1934 (SEA34) confers upon the Securities and Exchange Commission (SEC) the power to regulate the securities market. The mission of SEC is to protect investors, maintain fair, orderly and efficient markets. Aeropostale Inc., being a company registered with the NYSE, therefore subject to regulation by the SEC under the Act.

Sarbanes- Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 (SOX) was enacted in response to the collapse of Enron. It is based on the belief that regulation of corporate governance must be law based rather through discretionary codes. In effect, this Act is based on the agency theory which addresses the agency dilemma.

By-law of Aeropostale Inc. (effective July 1,

With good corporate governance, the costs of capital are lowered, transaction costs are reduced and firms are encouraged to use resources optimally (Balgobin 2008).

The board comprises of 11 members, the chairperson, seven independent directors, two non-executive director, and one executive director (Chief Executive Officer). This is reflective of a unitary board with majority non-executive directors which is typical of significant listed companies in the United States of America and is in compliance with NYSE requirement for listing. In addition, the size of the board is similar to most publicly-traded companies in the US which was discovered to have between 8-11 members. By-law of the Company however, provides for a larger number at the discretion of the board.

Evidence does not support the case for inclusion of women and minorities on corporate boards (Carter, et al. 2010). However, evidence from a study suggests that women have greater sensitivity to corporate social responsibility (Bear, et al. 2010). Being socially resposible, positively impact reputation (Bear, et al. 2010). Aeropostale Inc. board comprises of only three women out of eleven members, which represents 27% of the board, as depicted in figure 3