Re-examine Corporate Governance in financial crisis
With the economic downturn and subsequently the “financial crisis 2008” in effect, the corporate governance issue should be re-examined.
Reviewing the facts that quite a number of financial institution like Bear Stearns, Freddie Mac and Fannie Mae, etc all go into bankruptcy or being bought in this global financial crisis. while many of these bankrupted institutions are still one of the biggest player in their particular field just before they are vanished from the market. Canadian Broadcasting Corporation fill their headlines with “Wall Street awakes to find Lehman-Bros, Merrill Lynch gone” (CBC,2008) on 15-Sept to address the shocks that the shareholder suffered when they wake up to find billions of their shareholder value just simply vanished. It is abnormal while report in March, 6 moths before Lehman-Bros vanish when Bear Stearn just gone, is claiming “Lehman is not Bear.” (The deal, 2008)
This bring up a question on the corporate governance in these financial institutes, the principal-agent relation is not running for the purpose to “maximize” the value of the shareholders. Reports on the 2.5 billion shared by Lehman’s executives after the company vanished (NYpost, 2008) further suggesting the suspects on managerial side of these financial institutions. Questioning if they are upholding an ethical principal-agent relation in running the corporation. The corporate governance on this companies should be re-addressed.
Corporate governance “allow the shareholder of a firm to oversea the firms’ management and management decisions.” (Peter, 2003) However, the corporate governance nowadays largely rested on ‘how much’ money is being made rather than ‘how’ the money is being made. For examples, lots of securities holders of Lehman-Bros go into lawsuit against the banks that sell them the particular financial products after they experience great loss on the issue. (MingPao, 2008) Regardless to the...