Abstract
Being touted as the biggest scandal in terms of value, the Parmalat scandal offers a good opportunity to investigate and analyze the role of corporate governance in the failure of corporations particularly in the United States, Europe, as well as in emerging economies. This paper examines Parmalat’s history and describes the circumstances that led to the massive accounting fraud and collapse of Europe’s and indeed one of the world’s leading dairy producers. This paper highlights and points out how weak and ineffective corporate governance structure and process heavily contributed to other problems within Parmalat and eventually led to its demise in the fall of 2003. This paper incorporates various studies conducted in the past on corporate governance and corporate failure. Organizations with strong and effective corporate governance structure and processes demonstrate better performance in all areas than those with weak corporate governance processes.
Highlights
The Parmalat scandal remains on the biggest corporate scandals to have happened over the last 15 years
No other than the United States Security Exchange Commission (SEC) described the scandal as ―one of the largest and most brazen corporate financial frauds in history (SEC, 2003).‖ Jones (2011) stated that Parmalat was a typical example of accounting fraud that had taken place in the modern day Italy, perpetuated by a weak corporate governance structure and process, failure to exercise due professional care by the auditors, as well as greed y the founder and top management team
Over the last 20 years for instance, cases of corporate failure have been devastating world over with many of these pointing various reasons ranging from rogue management, accounting fraud, weak internal control system, complicity by auditors, lack of effective oversight by regulators, among others, which all point to problems in governance structure and process
Summary
The Parmalat scandal remains on the biggest corporate scandals to have happened over the last 15 years. Indexing terms/Keywords corporate governance, corporate failure, fraud, complicity, outside auditors, Parmalat, board of directors, top management, enforcement, regulations, compliance, accounting, performance, measures, analysts, monitoring
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