The Cost/Consequences of Bad Corporate Governance

Abstract

Corporate governance is something that benefits us all as players in one way or the other in the different segments of the economy, be it as investors, creditors, directors, regulators, service providing professionals, etc. Ethics, good standards in financial reporting and corporate governance enhance the common good rather than diminish it. It has been argued that corporate governance can be viewed from two perspectives or models: the narrow model/perspective and the broad model/perspective of corporate governance. The narrow view or model of corporate governance deals with how structures within a corporate entity or enterprise receive their basic orientation and direction. The broad view or model of corporate governance is the centre-point of both market economy and democratic society. The broader model suggests that issues of institutional, legal and capacity building as well as the rule of law are at the very heart of corporate governance. In order to achieve good corporate governance, there is need for effective and efficient control measures in dealing with the ownership structure and management of companies as well as issues of accountability, transparency and reporting to ensure shareholder and stakeholders value maximization. In order to ensure that successful corporate governance is in place, there are certain essential principles of corporate governance that must be adhered to. Compliance should embody observance of statutory provisions, codes of corporate governance, as well as ethics. The isolation of ethics or ethical behaviour from business dealings have in so many instances in the past led to business and system failures with catastrophic consequences. The consequences of bad corporate governance are far too high for the subject to remain a good to have. Corporate governance has become a must have and a sine qua non for meaningful growth and economic development.