Corporate Governance and Media Impact: Credit Suisse Scandal Analysis

This report analyzes the corporate governance failures exposed by the Credit Suisse spying scandal. It examines the scandal's origins, including the hiring of private detectives to monitor a senior executive, leading to the resignation of CEO Tidjane Thiam. The report highlights the media's crucial role in bringing the scandal to light, influencing public perception, and prompting regulatory scrutiny. It discusses key corporate governance issues, such as conflicts of interest, lack of board oversight, and diversity concerns. The report also delves into the importance of corporate governance for transparency, stakeholder protection, and global market success, referencing agency, stewardship, stakeholder, and resource dependence theories. The analysis concludes by emphasizing the significance of ethical standards and effective board oversight in preventing future scandals and maintaining organizational integrity. The report also considers the role of the media in the scandal and how it brought to light the conflict between Thiam and Khan.

Running head: CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
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Author Note

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Corporate governance is a framework of rules as well as practices with the help of
which the board of directors seeks accountability, justice as well as transparency within their
organisation keeping in mind its relationship with their stakeholders (McCahery, Sautner and
Starks 2016). Therefore, the primary role of the board of directors within the organisation is
to set strategic aims for the company and provide good leadership as well as put the latter into
effect and at the same time supervise the management of the business (McCahery, Sautner
and Starks 2016). The primary aim of the essay is to discuss about the scandal that occurred
at Credit Suisse. One of the first argument made in the article is about the spying scandal
where the former chief executive Tidjane Thiam had to quit from his post as he was involved
in the scandal where private detectives were hired to keep a check on senior executive in
Zurich that had put the reputation of one of Europe’s largest bank at stake (O'Donnell and
Neghaiwi 2020). It had also shocked Switzerland’s financial community as it was not
expected from the bank. People look up to banks as the latter provide people with solutions
and help people to differentiate between good and bad loans. If a bank is involved in such
scandal then people will start losing trust in banks (O'Donnell and Neghaiwi 2020). Second
argument in the article is what would happen to the career of Thiam after being involved in
such a scandal since Thiam cannot continue his office and the bank will now have to look for
an appropriate successor. The third argument in the article raises difficult questions regarding
culture as well as ethical standards (O'Donnell and Neghaiwi 2020). Since Khan hails from
Pakistan it might be that Thiam had racial prejudice against him which gave him a reason to
spy on Khan though he was an asset to the organisation who attracted wealthy customers
towards the bank (O'Donnell and Neghaiwi 2020).
Media has played a very essential role while reporting about the scandal that took
place in Europe’s one of the largest banks. Due to media coverage the incident garnered lot of
attention and led to the expulsion of the former CEO. The crisis that the organisation went

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through not only fuelled public discussion but at the same time led people to pay attention to
topics of corporate governance and its importance related to management, compensation,
transparency as well as rights of the shareholders (Paniagua, Rivelles and Sapena 2018). The
media also encouraged public to demand for political regulations within the organisation that
would be strictly followed by every member of the bank as well as other financial
institutions. Media has helped in making evaluations regarding firms as well as leaders and
were at the same time able to broadcast vital information to the audience (Aguilera and
Crespi 2016). By highlighting the role of corporate governance in the credit Suisse scandal
media has been able to influence the reputation of the firm as well as its leaders in both
positive as well as negative way. Media has been able to collect, aggregate as well as amplify
information for its audience and has highlighted some of the crucial issues that needs to be
considered. By reporting the above arguments the media tries to show the discrepancy that
occurs even within the top organisations (Paniagua, Rivelles and Sapena 2018). Had the
media not intervened in the scandal the solution would not come up quickly. The media
coverage gave a chance to the organisation to rectify their mistakes and take quick actions so
that the reputation of the organisation is not affected (Yang, Liu and Zhou 2016). The media
also highlighted the crucial as well as a sensitive issue regarding culture that might be
prevalent within the organisation that eventually led to the scandal. The media intervention
also brought to light the conflict between Thiam as well as Khan that had occurred previously
(Yang, Liu and Zhou 2016). Lastly, media reporting on the above issue was essential as it
made the proceedings of the bank transparent for the audience to see and decide.
Corporate governance is essential as it ensures transparency as well as balance for
economic development. Corporate governance also ensures that shareholders interests are
safeguarded. It is also the interaction between different participants in shaping the
performance of the various corporations (De and Vlahu 2016). Furthermore, corporate

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governance increases the accountability of every organisation and at the same time avoid
disasters that can happen or occur within the organisation. Corporate governance also
enhances social responsibility where the organisation has to protect the rights of the
customers, employees, suppliers as well as shareholders (De and Vlahu 2016). Since
globalization is the order of the day where organisations needs to attract foreign investor as
well as foreign customers. Foreign rules as well as regulations also needs to be followed
when foreign investors and customers are being dealt with (De and Vlahu 2016). All of the
above work cannot be completed without corporate governance. Without a good corporate
governance it is not possible to enter, survive as well as succeed in the global market
(Dignam and Galanis 2016). Therefore, it is essential to follow good corporate governance
for every organisation as it helps in achieving the desired objectives and helps in improving
mistakes of the organisation. At the same time corporate governance also helps in
maintaining legal as well as ethical standards of the organisation (Dignam and Galanis 2016).
It should be noted that one of the primary objectives of corporate governance is to protect as
well as preserve the interests the other stakeholders by improving the performance as well as
accountability of the organisation. Good corporate governance requires good as well as fair
legal frameworks that are enforced by a regulator body for the protection of the stakeholders
(Dignam and Galanis 2016). Good governance at the same time should be responsive as well
as consensus oriented. It should be able to show effectiveness as well as efficiency.
Most common theories associated with corporate governance are the agency theory,
stewardship theory, stakeholder theory and lastly resource-dependence theory. Agency theory
propagates that the goals of every agent differs from his principals. Agency theory also
suggests that financial rewards helps to increase the incentives of the executives so that
owner’s profits can be maximised (Bosse and Phillips 2016). Stewardship theory on the other
hand states that managers of an organisation are like stewards towards their owners and both

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of them share common goals and that their relationship involves training and decision-
making (Keay 2017). Resource dependence theory states that board is the provider of
resources for the executives that helps the latter to achieve the desired organisational goals
and that most of the decisions that are taken by the executives need approval of the board
(Chen, Hsu and Chang 2016). Stakeholder theory states that shareholders are not the only
group with a stake within the organisation. The theory further states that clients as well as
suppliers too own a stake within the corporation (Bonnafous and Rendtorff 2016).
Corporate governance though helps the organisation to maintain good relationships
with their clients as well as stakeholders and help the organisation to survive globally it also
faces some issues. Firstly, one of the most common issue faced by corporate governance is
lack of efficient board committees (Lebedeva et al., 2016). Another issue arises when there is
a conflict of interest when one member of the company has other financial interest that may
influence the decision-making of the company (Yermack 2017). Thus these type of conflict
often result in eroding the trust of the stakeholders as well as the public. Another issue may
arise when resistant managers can transform a good governance from the operational level
thereby leaving the business exposed to the state as well as federal violations (Yermack
2017). Corporate governance also goes through oversight issues where the board members
lacks awareness about the activities taking place within the organisation (Lebedeva et al.,
2016). Diversity is another severe issue faced by corporate governance where many board
members still distinguish people on the basis of culture, race as well as gender (Yermack
2017).
Therefore to conclude it must be noted that the Credit Suisse scandal also went
through a lot of corporate issues that has already been discussed in the previous paragraph.
One of the primary corporate governance issue that was found in the article is the conflict of
interest between Thiam as well as Khan who were employees of the bank and had different

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interests for the organisation. It was due to this conflict in opinion that forced Thiam to hire
detectives to spy on Khan that eventually led to the expulsion of Thiam who was the CEO of
the company. Furthermore, this incident had also put the reputation of the organisation at
stake where public as well as shareholders began to lose trust in one of the most reputed
organisations. Oversight issue was yet another issue that was highlighted in the article. For
corporate governance to work effectively it is the responsibility of the board members to keep
a check on the activities of the employees. The board members of the Suisse bank lacked this
oversight that gave a chance to Thiam to violate the norms as well as regulations of the
organisation due to which the latter suffered from reputational damage. Another corporate
issue found in the article was related to a sensitive topic of diversity. It is essential for the
members of every organisation to be tolerant towards everyone irrespective of their gender,
class, religion and others. However, since Khan hailed from Pakistan it might be that the
CEO had certain grudge towards him as Khan was different from others. It is clearly seen that
Thiam was not a supporter of diversity within his organisation.

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