Byline: Reg Birchfield
There is no escaping the conclusion that desperately poor corporate governance performance is really what is at the heart of the latest global economic crunch. While that might seem like a pretty harsh conclusion, Coral Ingley, a corporate governance specialist and associate professor, management at Auckland's AUT University, has come to it after some pretty deep thinking and extensive local and international conversations.
Just back from the annual conference of the increasingly influential International Corporate Governance Network held in Sydney this year, Ingley says three isues dominated proceedings: excessive executive remuneration, how to more effectively regulate for good governance, and how to improve risk management practices.
"The conference accepted that corporate governance failures allowed the world's financial crisis to develop," she says. "People acknowledge that the crisis was due to many things but, poor governance was at the core of it. And I agree with that conclusion. It begs the same old questions: where were the directors, and what were they thinking of?
"But," adds Ingley, "when I suggested that perhaps we need to go back to basics and think about governance fundamentals, they weren't very keen to do that. They really just want to patch up the leaky ship," she says disappointedly.
Unless someone starts to take a long hard look at the essentials of corporate governance, nothing will change and "we'll be doomed to keep repeating history", she adds. And given latest revelations of rapidly recovering banks again preparing to pay out more billions of dollars in bonuses, who can argue with her conclusion?
Ingley accepts that practitioners don't have much opportunity to stand back and reflect on how corporate governance might be changed so thinkers, including the academic world, should step up and question just how relevant existing governance structures are in today's world.
She points to the failure of modern corporate governance practices that led to the sharemarket crash of the late 1980s, the '97/'98 Asian financial crisis, episodes like Enron in the early 2000s and now, the 2007/2008 credit crunch that led to the current global recession.
"I understand that a complexity of issues led to these outcomes, but corporate governance lies at the heart of it," says Ingley. …