Cases of Successful and of Failing Corporate Governance Essay

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Cases of successful corporate governance include IBM, Apple, and Southwest Airlines. The American global technology and consulting corporation International Business Machine (IBM) has rigorous structures and mechanisms for sound corporate governance. The giant corporation’s outstanding employee management practices can be traced back to the days of former CEO and IBM founder Thomas J. Watson.

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Founded in 1914, IBM was among the first companies in the US to provide training programs for its employees. As early as 1934, the company joined the league of a few corporations at the time that provided a whole range of benefits including survivor benefits, company-sponsored vacations, and group life insurance to all workers. In addition, the IBM Corporation has one of the best codes of conduct on social responsibility, human rights, gender, transparency, and non-discrimination policy.

Apple’s unique corporate culture, on the other hand, has enabled the multinational consumer electronics and personal computers Corporation to emerge as one of the world’s most successful companies. Apple Inc. has a reputation for fostering excellence by recruiting highly talented and competent individuals. Under the leadership of the new Chief Executive Officer Tim Cook, Apple’s newly adopted efficient and impelling supply chain system has been acknowledged as the best in the entire world. Apple has also instituted efficacious control mechanisms in its procurement, manufacturing, and marketing.

This has enabled the company to expand the market territory and to easily meet the demands of its unusually loyal consumers. The company also has a specialized accounting and competent audit committee to oversee the financial transactions of the corporation.

Southwest Airlines is another American corporation that has gained a reputation for thinking outside the box and for its sound corporate and proactive risk management practices. The company’s corporate governance and its low-fare, low-cost business model have been an inspiration for many low-cost carriers across the globe. Southwest Airlines has been recognized for its effectiveness in investor relations, for supporting recruitment, promoting minority vendor programs, and providing scholarships. Southwest Airlines has adopted a corporate governance structure that emphasizes economic efficiency, excellent service, and accountability. The company has severally been ranked top for excellent customer service and customer satisfaction.

The most recent cases of failing corporate governance include Enron, Satyam, and Tyco. In the case of American energy, commodities, and services company Enron (which was revealed in October 2001) the management failed to stop the rule-breaking and fraudulent behavior of its employees. Though the company had in place stringent structures for good corporate governance, its employees nonetheless disregarded the company’s stated standards in their quest to generate profits.

Enron also had a properly constituted and competent corporate social responsibility task force, whose mandate was to oversee issues related to public engagement. On paper, Enron’s code of conduct on social investment sounded good from far but was far from good in practice. The board of directors blatantly allowed the management to contravene the very provisions of the code.

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The conduct of Enron’s audit committee also fell short of professionalism. Between 1996 and 2002, the company sought to compromise the independence of public auditing firms and adopted curious financial arrangements designed to conceal the true state of the company as well as minimize tax liability. The company’s audit committee particularly failed to prevent outdated and questionable accounting practices.

In the case of Satyam, in January 2009, corporate governance failure led to a massive accounting fraud which would have resulted in the collapse of India’s giant IT Services Company. The top-level management failed to detect the presence of a serious scam involving Chairman Ramalinga Raju (who is currently serving a sentence at Hyderabad prison), Raju’s brother, and the company’s former CFO Vadlamani Srinivas.

The court was presented with evidence showing how the chairman manipulated the financial accounts and how he inflated the employee population from the actual 40,000 to 53,000 to siphon off money out of the 13,000 non-existent employees. How the financial fraud of that scale could have gone undetected by the audit committee also leaves more questions than can be answered. Accusing fingers have been pointed at the independent auditing firm Pricewaterhouse Coopers for complicity in this scandal.

The global manufacturing company Tyco International Ltd, on the other hand, was embroiled in a massive $150 million scandal which worsened the company’s financial woes for the 2002 fiscal year. This theft of a huge sum of money was hatched and perpetrated by the company’s former boss Denis Kowalski and his confederate chief financial officer Mark H. Swartz. The scam which came to be known as the Kowalski scandal saw the two charged by the State of New Jersey, On November 27, 2002, for violating the Racketeer Influenced and Corrupt Organizations Act (RICO) statute. The federal suit against the two senior managers of Tyco provided evidence of how the CEO and his senior officer tampered and falsified business records, and how they used improper share deals to vociferously loot large sums of money from America’s highly diversified manufacturing corporate giant.

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IvyPanda. 2022. "Cases of Successful and of Failing Corporate Governance." April 29, 2022. https://ivypanda.com/essays/cases-of-successful-and-of-failing-corporate-governance/.

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IvyPanda. "Cases of Successful and of Failing Corporate Governance." April 29, 2022. https://ivypanda.com/essays/cases-of-successful-and-of-failing-corporate-governance/.

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