The last couple of years in Australia have seen some major corporate collapses, e.g. HIH, Ansett, One-Tel, Harris Scarfes. Other companies, small and medium, have also gone into liquidation and/or receivership, including Balfours, twice over. Corporate governance is about ensuring that corporation activities are governed, that they behave as they're meant to, that they don't do things like syphon off funds. I believe that tougher penalties for corporate misconduct and for breaches of the corporations act are neccessary, and whistleblowers must be properly protected. Full disclosure of activities and investigations of breaches should be mandatory.
Governance has proved an issue since people began to organise themselves for a common purpose. How to ensure the power of organisation is harnessed for the agreed purpose, rather than diverted to some other purpose, is a constant theme. The institutions of governance provide a framework within which the social and economic life of countries is conducted. Corporate governance concerns the exercise of power in corporate entities. The OECD provides the most authoritative functional definition of corporate governance:
"Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies 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. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance."
"Systems and processes for ensuring proper accountability, probity and openness in the conduct of an organisation's business."
What we underestimated I think, were some quite pernicious and endemic factors at play—a new outbreak of management greed, the failure of Boards to put a brake on excessive and structurally unsound remuneration practices, and many commercial pressures that influence management and Boards to focus on short term pay-offs. These excesses were nutured by one of the longest sustained periods or market prosperity in our experience. The chance to make big money quickly appears to have seduced not only corporate management, but also a range of market participants—with analysts and at least some auditors also foregoing their ethics in return for record level fees and commissions.