Corporate Failure: Scandals in the Corporate Sector

CORPORATE FAILURE

EXECUTIVE SUMMARY
This assignment emphasizes on various scandals that have taken place in the corporate sector on
an international platform. Due to the magnitude and intensity of deception involved towards its
stakeholders through false augmentation in goodwill, these corporate scams have gained
popularity and left its mark in the history of its national corporate culture. It also puts forward the
role internal management and auditors in provide assistance whether directly or indirectly in
such scandals to become reality with such tremendous loss to its concerned stakeholders. The
three cases discussed here are of Lehmann Brothers from the United States, the HIH Insurance
and the Paramalat case from Italy. The last section concludes how these scandals pose threats to
its investors and general public leaving behind many examples of failures from management’s
and auditor’s team.

Contents
INTRODUCTION........................................................................................................... 3
EXECUTIVE SUMMARY................................................................................................ 3
LEHMANN BROTHERS.................................................................................................. 4
HIH INSURANCE........................................................................................................... 6
PARAMALAT CASE....................................................................................................... 9
CONCLUSION............................................................................................................. 12
BIBLIOGRAPHY.......................................................................................................... 13

INTRODUCTION
As business organizations seek and exploit more opportunities for growth, there is an alarming
increase in the intensity of competition they are likely to face from its peers. With such intense
competition, that has taken shape enabling businesses to enjoy global investors and clients, there
are also high chances of scams that can disrupt corporate governance and sustainability. To
define, corporate governance is a collection of several methodologies that can help businesses
control and operate effectively and efficiently concerning all its stakeholders in a responsible
manner (Axelsen, Green, & Ridley, 2017). There have been serious accounting and reporting
misconducts which have been reported over the last 2 decades and which have set an example for
coming future. Some of the very famous and prominent companies in this regard have been
Enron, Satyam, WorldCom, HIH Insurance, ABC Learning and One Tel company and many
others. All these have led to the introduction of the Sarbanes Oxley Act. All these companies
have suffered massively in terms of the decline in the share prices on account of issuing
misstated financial statements and thereby misleading the investors.
LEHMANN BROTHERS
This section overlooks at the fall of a corporate entity named Lehman Brothers in the US history
and its subsequent events. It reviews factors that led to the failure and consequently the
bankruptcy event (Cundill, Smart, & Wilson, 2017).
Originated in the 19th century as a small general store, the organization prospered gradually as
the national economy emerged as a powerful culture of its times. Though it had managed to
survive all odds including the Great Depression as well, it could not manage to hold its knees