ACC03043 Global Financial Crises Assignment Sample

• Subject Code : ACC03043
• University : Southern Cross University My Assignment Services is not sponsored or endorsed by this college or university.
• Subject Name : Accounting & Finance

Corporate Governance

Q1. Corporate Collapse Experienced in Australia

An organizations performance depends on cooperate governance. It monitors the activities of the company in regards to its various stakeholders which include shareholders, employees, investors and customers. There are different types of codes and practices for streamlining the corporate governance process. Corporate governance is defined as ethics related to business (Aguilera and Crespi-Cladera 2016). It is because the company needs to follow the rules for regulating the market environment. Australian companies failed to enforce the requirements that were disclosed. The reasons for Laurie Connell, Alan bond and Girvan corporations collapse is Australian security regulations. The bond corporation and Girvan corporation lost 600 million dollars when they had a deal with the government of the country. The government gave a loan to the companies on inflated prices. Due to junk bonds the companies were struggling financially. These collapsed because the company do not have money to pay the intersest on the loans taken. Due to poor governance practice, a political scam occurred in the companies.

With the increase in governance, the social corporate responsibility also increased. Environment, social and governance are three major factors of corporate governance. The shareholders and investors of the company must be involved when there is a need to make decisions. The chairman and CEO must check whether the goals of the organization are achieved properly or not. Corporate governance increases performance and also take care of the ethical and legal concerns of society.

Corporate governance and its practices are changing with the change in the era. Corporate governance codes need to be well organized. The best practices defined can be adopted by private and publicly listed companies. Corporate governance requires regulation it is thus advised that the companies need to regulate their financial condition to protect Australian shareholders and customers from experiencing loss. The company must manage the accountability to protect the shareholders from the financial disaster (Beekes et al. 2020). Directors of the company are responsible for the ethical functioning. The government imposed all the liability of the financial crises on its passive members. Stringent duties must be imposed on the directors so that they make the decisions in favour of the company.

Changes in todays corporate governance that needs to be incorporated to improve performance include the following.

• Non-executive members were given responsibilities. Being the board of directors, they used to get fixed remuneration in comparison to executive directors (Demirag 2018).
• The roles and responsibility of Chairman and CEO was separated to take decisions independently.
• Audit, nomination and remuneration committee was introduced to perform their role in the organization.

It can be concluded with strict guidelines and changes in the governance the outcome of the companies could have been prevented.

Q2. Collapse Due to Global Financial Crises

Financial crises began in 2007 when international banking crises also occurred in the United States. Deregulation was the root cause of the collapse of the financial industry. It was found that the companies were providing loans to those who do not have good credit ratings. The financial institution started bundling loan assets for security purpose. It was the biggest corporate governance issue at that time. It was identified that securitization of debt exposes high risk for the financial institution. Reckless investment decisions were made by the bankers which led shareholders of the companies to expose the loss (Gachie and Govender 2017). It thus became important to analyze non-executive directors of the failed institutions who keep an eye on the decisions of executive directors and work in the organization. Banking regulators decisions for mortgage loans got criticized. It is due to this, SEC proposed some changes for companies. The code of corporate governance got introduced in the entire world. Even the United Kingdom also propose corporate changes for increasing accountability and transparency (North 2018). To check the corporate government and management methods, companies were asked to report business model and financial strategies.

It was found that the election of chairmen yearly from the board of directors would be the best practice to increase the role of the non-executive members (Geiler et al. 2018). The company has changed a variety of the codes to justify the compensation provided to the members of the board. It was also asked to disclose the remuneration of the board of directors to shareholders. The corporate government boarded its responsibilities to risk management. The major work of the audit committee of risk management was found to track and monitor the risk of the company (Heemskerk et al. 2016). Besides, it was found that the board of directors were evaluated based on performance by the regulator in at least three years. The companies must have a separate chairman and CEO. This division will help the company to carry out proper management of all the committee members.

It would be beneficial for the organization as the potential power would be in the hand of one deciding person (Petre 2017). It was found that the pays related to the performance of the employees were directly linked to commitment and interest for the company. It can be concluded from the financial crises that the companies must have short term goals. These goals are linked to executive compensation to improve the decisions taken by the board. The company must internally control and measure the risk management process of the organization. The company must integrate good governance and high ethical practices to flourish in the world market. It can be concluded from the above findings that the financial collapse of the institution as a result of corporate governance failure and it led to crucial changes in the practice all across the globe.

References for Corporate Governance

Aguilera, R.V. and Crespi-Cladera, R., 2016. Global corporate governance: On the relevance of firms’ ownership structure. Journal of World Business, 51(1), pp.50-57.

Beekes, W., Brown, P., Zhan, W. and Zhang, Q., 2016. Corporate governance, companies’ disclosure practices and market transparency: A cross country study. Journal of Business Finance & Accounting, 43(3-4), pp.263-297.

Demirag, I. ed., 2018. Corporate social responsibility, accountability and governance: Global perspectives. Routledge Location: London.

Gachie, W. and Govender, D.W., 2017. Practical application of corporate governance principles in a developing country: A Case Study. Risk Governance & Control: Financial Markets & Institutions, 7(2), pp.67-75.

Geiler, P., Renneboog, L. and Zhao, Y., 2018. CORPORATE DIRECTOR ELECTIONS.

Heemskerk, E.M., Fennema, M. and Carroll, W.K., 2016. The global corporate elite after the financial crisis: evidence from the transnational network of interlocking directorates. Global Networks, 16(1), pp.68-88. 

North, G., 2018. Are Corporate Governance Code Disclosure and Engagement Principles Effective Vehicles for Corporate Accountability: The United Kingdom as a Case Study. Deakin L. Rev., 23, p.177.

PETRE, V., 2017. DECISION IN THE CONTEMPORARY COMPANY, MAJOR FEATURES OF THE DECISION AND OF THE DECISION MAKING SYSTEM. Review of General Management, 25(1).

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