Reasons for Corporate Governance failures
is the set of processes, customs, policies, laws, andinstitutions affecting the way a corporation is directed, administered or controlled. Corporategovernance also includes the relationships among the many stakeholders involved and thegoals for which the corporation is governed. The principal stakeholders are theshareholders, management, and the board of directors. Other stakeholders includelabor(employees), customers, creditors (e.g., banks, bond holders), suppliers, regulators,and the community at large.
This article reveals various reasons for failure of Corporate Governance; CorporateGovernance consists of, various examples of Corporate Governance Failures like Enron,Satyam, Cadbury, Wal-Mart, Xerox and why Corporate Governance failed in such bigorganizations. Article also describes various mechanisms of Corporate Governance like (1)Company's Act (2) Security law (3) Discipline of capital market (4) Nominees on companyboard (5) Statutory audit (6) Codes of conduct etc. Some factors that influence theCorporate Governance like Ownership structure, Structure of company board, financialstructure, Institutional Environment etc. Various systematic problems in CorporateGovernance and Recent Corporate Governance failures.
ey words: Corporate Governance, Governance, Satyam, Enron, Wal-Mart,Mechanism,Polly Peck and ColorollCorporate governance
is a multi-faceted subject. An important theme of corporategovernance is to ensure the accountability of certain individuals in an organization throughmechanisms that try to reduce or eliminate the principal-agent problem. A related butseparate thread of discussions focuses on the impact of a corporate governance systemin economic efficiency, with a strong emphasis shareholders' welfare. There are yet otheraspects to the corporate governance subject, such as the stakeholder view and thecorporate governance models around the world.
There has been renewed interest in the corporate governance practices of moderncorporations since 2001, particularly due to the high-profile collapses of a number of largeU.S. firms such as Enron Corporation and Worldcom. In 2002, the U.S. federal governmentpassed the Sarbanes-Oxley Act, intending to restore public confidence in corporategovernance.
Factors influencing corporate governance
The ownership structure
the structure of ownership of a company determines, to a considerable extent, how aCorporation is managed and controlled. The ownership structure can be dispersed amongindividual and institutional shareholders as in the US and UK or can be concentrated in thehands of a few large shareholders as in Germany and Japan. But the pattern of shareholdingis not as simple as the above statement seeks to convey. The pattern varies the across theglobe.Our corporate sector is characterized by the co-existence of state owned, private andmultinational Enterprises. The shares of these enterprises (except those belonging to a