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Corporate governance of finances in major corporations has been a major controversy during the recent recession. The scandal at Satyam is indicative of problems across the board, from CEOS, to executive boards, to independent auditors and even accounting firms such as Price Waterhouse. In this essay, the author will consider the unique problems presented in a globalised market where faith in the market is essential for international trade to function.
When the CEO assumes the entire responsibility in a corporate governance fiasco absolving everyone else (family members, board of directors, independent directors and other top management people), how should the regulatory authorities and the government proceed against the CEO who has confessed and other people who were absolved by him. Critically evaluate especially from the point-of-view of absolving all the others including the top management, board of directors and the family members, from any of the accumulated corporate wrongdoings.
What puzzles this author is why so infrequently the government and regulatory agencies never investigate accounting firms that give AAA credit ratings to companies like Satyam in the first place. It is possible (although highly improbable) that leaders may be in the dark as to the truth behind scenes, but it must be impossible for accountants who are auditing the books not to know what is going on. There are many calls at the present time for transparency in reporting procedures. However, if the dodgy accounting procedures and creative book keeping that make such crises possible are not reigned in, then one must be cynical that the arrest of the involved...
For a CEO to get any clemency deal, the accountants have to be included as well or what is wrong with the system can not be fixed.
Certainly, this is a point that Kumar and Sapkota get right (Kumar, Paul, and Sapkota P. 2011 1-2). Truly, when Price Waterhouse in involved, it is not just an Indian financial crisis, but one that adds to the angst that the entire financial system is in. Therefore, regulatory efforts have to be global to be effective. However, to begin with, one needs to concentrate upon the Indian crisis. What the authors in the article make clear is that the accounting procedures at Price Waterhouse and the incompetence of the Board of Directors, the audit committee, and the auditors as a whole were responsible, not just the CEO (ibid. 2). The only way for anyone to know the extent of the crisis would be to offer clemency to the CEO so that all of the other criminals could be brought to justice. It seems that the biggest fraud is outside of Satyam and at Price Waterhouse. Going after them would provide the best reform of the financial system and send a message to future lawbreakers that creative accounting leads to sure punishment. In accordance with standard agency theory which sees problems with oversight by government agencies, Capricio and Levine see large investors (large equity holders and large banks) as being the primary regulators in the United States and Britain. For this to work on a global basis, Bank CEOs must be held to account with "incentives" to…
References
Caprio Jr., J. And Levine, R. (2002). Corporate Governance in Finance: Concepts and Inernational Observations. World Bank, IMF, and Brookings Institution Conference, Building the Pillars of Financial Sector Governance: The Roles of Public and Private Sectors.. pp. 1-44. Available: http://www.siteresources.worldbank.org/DEC/.../corporategover_finance.pdf.
Kumar, G, Paul, P, and Sapkota P. (2011). The Largest Corporate Fraud in India: Satyam Computer Services Limited, Proceedings of the American Accounting Association 2011 Annual Meeting pp. 1-23. Available: http://www.mendeley.com/research/largest-corporate-fraud-india-satyam-computer-services-limited/. Last accessed 24 Dec. 2011.
Corporate Governance Two different, yet related corporate governance definitions have been presented in this paper (Mallin, 2006: 3). Sometimes they cause confusions and controversy and ultimately affect the implementation of tightening of governance (Windsor, 2009). The 1992 Cadbury Report, which presented the major proposals for tightening governance, described governance as the system through which firms are managed, regulated and supervised (Cadbury, 1992: 15). The fundamental agency idea emphasizes that corporate governance has
Corporate Governance: A review of Literature What is Corporate Governance? Principles of Corporate Governance Theoretical foundations of corporate governance Agency theory Stewardship theory Stakeholder theory Post-Enron theories Corporate Governance: The changing trends Recent developments on regulatory front and research Corporate Governance: Relationship with market indicators Venture Capital Model: Impact on Corporate Governance Appendix I- Examples of Corporate Governing bodies This paper is a review of pertinent literature on corporate governance. Corporate governance addresses the control issues created due to the separation of ownership
Reliability & Validity The key will be to find reliability and validity. Reliability, of course, is the concept that if someone else does the same exact research in the same exact way, the research conclusions drawn will be close to if not entirely identical. Validity is similar in that the conclusions met have to be directly applied and ascertained based on the data that actually exists and not based on the
Corporate Governance There have been controversies on the subject of the governance and accountability of big corporations, but it is only recently that these issues have gained prominence. The compensation for the top management is one of the major issues of corporate governance today. The primary reason for offering stocks to executives was for raising the share prices and thereby increasing its value for both investors as well as shareholders. Though
Or that he is to make expenses on dropping pollution outside the quantity that is in the best welfare of the business or that is mandatory by law in order to add to the social objective of improving the atmosphere (Friedman, 1970). Corporate culture has been established as an administration tool. Corporate culture can aid to attain corporate objectives comprising profit enlargement. Advocates of corporate culture as a tool propose
It should not be treated as a separate exercise undertaken to meet regulatory requirements." (ICA, 29) Here is expressed a philosophical impetus that drives the focus of this research, that such compliance which will generally concern matters such as corporate accounting, the practice of internal oversight and the practice of financial transaction must be considered inextricable from other aspects of practical, procedural and legal operation in terms of its