What are the affected parties in the schemes above to manage profits to prop up stock price?

1. In recent years, publicly traded companies are under pressure to meet or beat the analysts’ consensus earnings estimates in their quarterly reports because the market will punish those that fail to deliver expected earnings. Thus, managers tend to utilize many methods to improve reported profitability that is cosmetic in nature and do not affect “real” operating performance to meet market expectations. These methods are referred to as earnings management (commonly called” cooking the books”). Managers have different motivations to engage in earnings management, and they usually defend their actions, including the following arguments: (1) Increasing stock price by managing earnings benefits stockholders; no one is hurt by these actions, (2) Earnings management is a temporary fix; such actions will be curtailed once “real” profitability improves, as managers expect.
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What are the affected parties in the schemes above to manage profits to prop up stock price? Do the ends of earnings management justify the means? What governance structure you think to curb earnings management and increase the reporting quality? Please discuss.
3. WSJ runs a story about several top executives at Lordstown Motors Corp. selling off chunks of stock in the electric truck startup ahead of reporting financial results. For example, Chuan “John” Vo, one of its executives, sold almost all of his vested equity 99.3% on Feb. 2, leaving him with 717 shares and proceeds of more than $2.5 million. On June 14, 2021, the company said a special committee formed by Lordstown Motors’ board had looked into the executives’ stock sales and concluded they “were made for reasons unrelated to the company’s performance. Nonetheless, Securities lawyers, accountants, and analysts say such transactions are highly unusual and criticize the company has weak internal control over the trading of its officers.
So, what internal controls over these executive actions exist at most publicly traded companies? In your answer, define the term internal controls. Also, why do others question the propriety of these executive actions despite this board of directors’ conclusion? Please discuss.

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