Question

What are some governance problems corporations are facing today? Please list at least 10 common corporate governance problems, besides the example below.

•Example: Lack of board independence.

Possible research resources: •TheIIA.org •The National Association of Corporate Directors (NACD)

Answer 1

• Conflict of interest arises when a controlling/board member of a corporation has other financial interests that directly conflict with the objectives of the corporation.
• Oversight issues also arise as due to lack of oversight there might be a violation of laws and regulations in daily operation. So the supervision has to be done regularly and can't be an oversight.
• Accountability issue also arises as who will be responsible for what should be mentioned earlier in the code of conduct otherwise lead to a conflict.
• A corporation must accurately report its financial statements otherwise transparency issue will be there
• Members of the board should make a decision that should be best for the shareholders else ethical issues will arise.
• A board might have all the rules and regulations but can't apply or implement it properly which will lead to degradation in governance standards.
• The short-termism of board members could reduce the value creation for shareholders as it robs the critical expertise.
• Diversity has to be maintained on the basis of age, gender, race, stakeholding, but it is not maintained generally.
• Principal-Agent Conflict i.e. mismatch of ideas between the board and the shareholder's
• The budgetary issue may arise due to the hiring of independent directors and board members