Parmalat, BCCI and Maxwell are examples of major corporate failures that shocked the world prior to the inception of corporate governance in the 1980s. However, since the corporate scandal of Enron, corporate governance has brought about increased attention amongst regulators and all stakeholders world over particularly shareholders, banks and governments. This concern has resulted in a focus on the relationship between a company’s shareholders and its Board of directors, as well as the executive and non-executive directors.
Regarded as leadership in the corporate sense, corporate governance is meant to assist companies to manage and control risk processes within an organisation.
Inferred from its definition, corporate governance need to be more pragmatic in its operations ensuring that the company conforms to the laws and regulations.
The corporate governance structure specifies General hashtag linkage to COVID-19 Pandemic the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. This is usually not the norm. Enron’s demise as a result of its excessive risks, conflict of interest and poor accountability on the part of its directors, does not seem to have scared other organisations. Recent events in organisations are not anything to write home about. Corporate governance is meant to govern not to be used as a witch-hunting exercise. However, the way things happen in the board room, corporate governance needs to be tightened if it can bring about the change so much needed at this time.
By the directors confirming that the company accounts comply with requirements in the Company Act, they become accountable to the entire stakeholders and responsible for safeguarding their assets and other of the Group and hence for taking reasonable steps for the prevention of fraud and other irregularities. Enron’s conduct indicated that its directors were not really complying. To date, there is increasing acceptance that in spite of legal duties remaining solely to shareholders, there is the view for companies to be more accountable to other stakeholders including workers. Even though this view is being challenged both in America and the U.K, shareholders still want to wield more powers to maintain their investment. This is evident in the recent demonstrations by shareholders describing directors as ‘fat cows’.
Considering the relevant principles missed by Enron in its operations in comparison with Next, it is gainsaying the fact that some of the mistakes Enron made are still going on in some organisations around the globe-unnecessary risk-taking; performance-related pay schemes including share options to Executives with the non-executive directors sitting aloof doing nothing. Enron’s Board’s compensation committee refused to ask any question about the award of salaries, perks, annuities, life insurance and rewards to the executive members at a critical point in the life of Enron. Sir Goodwin’s recent pension saga is a recent case in point. It leaves a sour taste in the mouth of all stakeholders to see that ‘simple’ things to be done to salvage ‘huge’ losses or scandals are clearly overlooked may be due to familiarity which breeds contempt, anyway.