A tale of corporate governance: lessons why firms fail

A tale of corporate governance: lessons why firms fail Purpose – To review the world's and Australia's notable firm failures associated with divergence of best practices, describing the link of how corporate sustainability depends on its corporate governance implementation. Design/methodology/approach – An array of existing theories and prior academic findings on corporate governance and corporate sustainability published between 1998 and 2004 are compared and contrasted, fitted with empirical evidence of what had happened with Enron, Inc. (Enron) and HIH Insurance (HIH). Matrices are developed to intercept the key good corporate governance perspectives with the study propositions. Findings – The study indicates that both Enron and HIH acknowledged good corporate governance as a prevailing framework, yet failed to implement it. Each of the principles had been violated and had served as an attribute to the firms’ failure. Research limitations/implications – This study is limited to the two notable cases, notwithstanding the implication that perhaps its applicability in other corporate settings may be pursued. Data and information sources for this paper have also been limited to the use of secondary data obtained from the public domain. Practical implications – This paper is expected to fill part of a gap in linking the studies of how corporate sustainability depends on its corporate governance. Originality/value – This paper provides a practical approach in identifying the existence or non‐existence of key good corporate governance principles in the going‐concern of corporations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

A tale of corporate governance: lessons why firms fail

Managerial Auditing Journal, Volume 20 (3): 12 – Apr 1, 2005

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Publisher
Emerald Publishing
Copyright
Copyright © 2005 Emerald Group Publishing Limited. All rights reserved.
ISSN
0268-6902
DOI
10.1108/02686900510585609
Publisher site
See Article on Publisher Site

Abstract

Purpose – To review the world's and Australia's notable firm failures associated with divergence of best practices, describing the link of how corporate sustainability depends on its corporate governance implementation. Design/methodology/approach – An array of existing theories and prior academic findings on corporate governance and corporate sustainability published between 1998 and 2004 are compared and contrasted, fitted with empirical evidence of what had happened with Enron, Inc. (Enron) and HIH Insurance (HIH). Matrices are developed to intercept the key good corporate governance perspectives with the study propositions. Findings – The study indicates that both Enron and HIH acknowledged good corporate governance as a prevailing framework, yet failed to implement it. Each of the principles had been violated and had served as an attribute to the firms’ failure. Research limitations/implications – This study is limited to the two notable cases, notwithstanding the implication that perhaps its applicability in other corporate settings may be pursued. Data and information sources for this paper have also been limited to the use of secondary data obtained from the public domain. Practical implications – This paper is expected to fill part of a gap in linking the studies of how corporate sustainability depends on its corporate governance. Originality/value – This paper provides a practical approach in identifying the existence or non‐existence of key good corporate governance principles in the going‐concern of corporations.

Journal

Managerial Auditing JournalEmerald Publishing

Published: Apr 1, 2005

Keywords: Corporate governance; Management failures; Standards

References

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