“An organizational framework that includes procedures, structures and individuals that meet the interests of shareholders and other stakeholders through handling and regulating management practices with strong company experience, objectivity, transparency and honesty” is the concept of corporate governance through Gabrielle O’Donovan in “A Board Culture of Corporate Governance.” If you can see, delineating the corporate governance trend can be an challenge in itself; now just consider attempting to instill a corporate governance strategy inside a organization. You may want to check out shareholder theory for more.
It is conceivable that the absence of one unambiguous corporate governance concept is the cornerstone on which fraud has evolved over the past few decades; nevertheless, it is highly impossible. Going back to the end of O’Donovan’s concept of corporate governance, the true position of development for fraud is a loss of objectivity, transparency and corporate honesty. Corporate governance assumes a bureaucratic structure, with the Board of Directors at the center, then senior management, accompanied by internal auditors and lastly external agencies (Lawrence, Weber, Company and Society 12th Ed.). The corporate governance strategy of a company can only be as powerful as its weakest practitioner, and the weakest practitioner can exist in any Hierarchy rank. Why and/or why would the governance framework for a company fail?
Next glance at the corporate stage, the board of directors. The board is responsible for developing the corporate governance strategy for the business, and they have no reason if they wouldn’t recognize the rules or obey them. This does not mean that there is no wrongdoing at the top level anyhow. Of various causes, leaders of a company’s board of directors take part in illegal practices. First of all, the Board members are decided on and there are no requirements. Anyone within an organisation may be elected into a place of considerable power; and in fact, anyone who is inexperienced with corporate operations may potentially take part in unethical acts and not really be conscious of them. Another explanation the Board of Directors considers deception is related to conflicts of interest. Members of the corporation, as anybody may be voted on, are either on the board of directors of another organization, or are often the senior management of the organization (Lawrence, Weber, Market and Community 12th Ed.). An indication of a conflict of interest with a person who is part of the executive management and on the board may be a business decision that increases the stock price of the firm, because that individual’s CEO gets equity awards because part of their salary, although that decision does not match in with the governance policies of the organization. The lack of honesty on the part of the individual allowed them to make an unethical choice to build money for themselves.