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The Institute of Economic Affairs
2 Lord North Street
Westminster
London SW1P 3LB
212 pages
£12.50 paperback
ISBN 0-255-36542-X
The corporate scandals of Enron, Worldcom, Parmalat and others has brought about
a new call for integrity in business life.
Post Enron, governance has become a favoured scapegoat blamed for any number of
major ills in the corporate world. 'Doing an Enron' it seems now covers
questionable auditor and board independence, rapid share price falls, financial
innovation, high executive and directorial remuneration, opaque financial
statements, off-balance sheet financing, faddish investing, ideological
regulation, and above all, falsely claiming to have title to assets.
Most of the matters for which 'Enron' has become shorthand have little or no
relation to corporate governance. But what Enron did show us was that the
Anglo-American system for corporate governance works.
No system can prevent all the problems to which complex human arrangements are
liable. As the Higgs Report on the Review of the role and effectiveness of
non-executive directors states, "no system of governance can or should fully
protect companies and investors from their own mistakes." Which probably
explains why reports of a company and its executives' wrongdoing makes such avid
reading.
Like the first edition, the main theme of this book is that the Anglo-American
model is better than the alternatives at achieving the definitive goals of
corporate governance.
But the continuing superiority of the Anglo-American model does not justify
complacency. Despite, or perhaps precisely because of, its prominent success,
the Anglo-American model remains under attack.
Insufficiently understood and appreciated by its many beneficiaries, the author
claims it is at risk of being undermined by frequent calls for government
regulation, and argues that true corporate governance refers simply to ways of
ensuring that a corporation's actions, agents, and assets are directed at the
definitive corporate ends set by the corporations' shareholders. And this is
where the argument starts.
If the responsibility of corporate governance is to rest on the shoulders of
these interested parties, then true corporate governance relies on those parties
having the ethics, and ultimately being held accountable for the corporation's
wrongdoing. A real case of 'the buck needs to stops at the top'.
Source:
Credit Control Journal
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