Question

How corporate governance principle "instil a culture of acting lawfully, ethically and responsibly" would have avoided the bank scandals by directors?

Answer 1

Ques. How corporate governance principle "instil a culture of acting lawfully, ethically and responsibly" would have avoided the bank scandals by directors?

Ans. Corporate governance requires companies to be governed lawfully, ethically and responsibly. Directors are the main governing force of any company, they provide strategic direction to the company for it's future. They act in accordance with corporate governance norms which requires all the activities of the companies to be lawful, business of the company to be conducted ethically & companies should be responsible towards it's various stakeholders like shareholders, investors, creditors, bankers, customers, society at large. When acting ethically directors represents all the facts about the companies to bankers truthfully. Based on facts and financials of the company bankers grant loan and credit facailities to the company. Bankers also review financials of the company periodically and reduce or stop granting further credit when they observe that company would not be able to serve it's dues. So, based on above discussion we can say that corporate governance principle "instill a culture of acting lawfully, ethically and responsibly" would have avoided the bank scandals by directors.