Corporate Governance Implications from Global Financial Crisis

Running Head: Corporate Governance
Corporate Governance
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Author’s Note

Running Head: Corporate Governance
What was the underlying reason for the failure? Would today's corporate governance codes, rules
and regulations have prevented these outcomes?
The reason for the failure in corporate governance targeted the public expectation that the
organization should be accountable for their performance and the impact which it’s created in the
fall of the Enron Corporation in 2001. The cause of the downfall had shook the Wall Street and it
resulted in market manipulation, corruption, illegal deals and corporate arrogance and suicide
cases. The Enron scandal is the example that gives lessons we learn about the corporate
governance (Tricker and Tricker 2015). The reason it had faced difficulties when it had
constructed the offshore entities to hide losses that the company would had otherwise engage. A
false impression was created by the officers who enacted the implementation of new tricks and
created an illusion of billions in profit, even in reality the company was essentially losing
revenue. Even at that time the organization was trading on the higher stock to match up with the
large share of profit gains. Various misdeeds and corruption committed by the employee of the
organization Enron’s and the officers were extensive and constant. Predominantly the damaging
misrepresentation produced overstated salaries reports for the shareholders and even for the
employees who suffered devastatingly when the company had failed.
In today’s world the officers of the corporate governance has taken steps to regulate the
rules and regulation which has changed regulatory procedures for the companies. The rules has
stated clearly to provide the shareholders to provide proper remuneration to the top executives,
employees and the labor staff. Secondly, the directors of the organization should be elected on an
annual basis. Thirdly, the creation of board level committees are lead to focus on the
organization towards the exposure of risk. Lastly a suggestion was made regarding the separation
of the role of CEO and the chairman and individually the policy was established. In order to cut

Running Head: Corporate Governance
down from the scam cases and incidence of the corporate fraud, the Us Senator and the US
representative had drafted a legislation known as Sarbanes- Oxley Act (SOX). The resolved of
the Act was to protect the investors by refining the correctness and reliability of corporate
disclosure in the financial statement. The increasing requirement for commercial transparency in
viewing the report of the shareholders and explanation of the financial statements.
It is advised by all the organization to provide a year-end report which would state the
financial statement and the internal control that has been implemented and the effectiveness of
the same place. In response to the collusion between the Enron and public accounting firm, the
organization monitored corporate behavior especially in the area of accounting. In case of any
crime or corruption the penalty would be charged on a high rate and can also lead to termination
from the work place. The Global Financial Crisis had kept a control over the internal and
external conducts of the organization. The problems were even faced by the government where it
could not understand the measuring power with the development of the market in the advanced
or emerging market. The sources of accounting and finance from the global market had resulted
in an increase in the diversity of the corporate ownership.
A brief report on corporate governance implications stemming from the global financial
crisis.
Financial crisis can be termed as when the value of the assets steeply declines in price
and value, the business and the corporates are unable to pay their credits and financial
institutions practice liquidity shortages. A financial crisis is associated with an organization
where the investors who sell off their assets and withdraw the money from the recurring and