Andrea Melis’s Corporate Governance Failures: to What Extent is Parmalat a Particularly Italian Case? (2005) starts with introducing the Parmalat situation as a fairly standard accounting fraud. The dramatic collapse of the world leader in the diary food business has led to questioning of the accuracy of accounting and financial reporting standards and the Italian corporate governance system in general.
The paper seeks to answer the question whether the Parmalat case can be regarded a particularly Italian scandal, which means that the corporate governance problems that emerged in Parmalat are specific to Italy, or whether the case fits into a global corporate governance argument.
To answer the question the author explores the main accounting and corporate governance issues related to the case with the focus made on the supply side of information (the role of the information supply agents, like board of directors, board of statutory auditors, internal control committee, senior management and external auditing firm in the Parmalat case is considered).
Melis examines the main characteristics of Parmalat’s corporate governance structure, investigates what monitoring mechanisms failed and to what extent this failure depended on specific features of the Italian corporate governance system. The main characteristics of Parmalat’s corporate governance system are contrasted and compared with those existing among Italian listed companies and the top corporate governance standards in Italy.
Empirical evidence seems to prove the lack of a monitoring structure making corporate insiders accountable in the presence of a corporate governance system characterized by a controlling shareholder. The roles of the ownership, control structure and of the board of statutory auditors analyzed have Italian traits and suggest that the Parmalat case is a particularly Italian scandal. However, the Parmalat’s corporate governance neglected the key existing Italian corporate governance standards of best practice, such as the presence of independent directors and the composition of the internal control Committee.
What is more, the roles of the external auditor and the internal control committee as noneffective monitors suggest that the Parmalat case fits into the global corporate governance argument. The conclusion that the author makes is “Whilst the Parmalat case may be considered to some extent a particularly Italian case, this does not imply that the corporate governance problems that emerged at Parmalat should be disregarded and catalogued as countryspecific, since they may also surface at other firms around the world.” (Melis, 2005 p. 487)
I agree with the author’s position concerning the Parmalat case. I believe that the two-side analysis that she has made enables one to get an objective view on the problem and to understand the reasons why the Parmalat case should not be regarded as a particularly Italian case only. Still, I am inclined to think that the aspects of the case that the author neglects would have contributed to the objectivity of her research, I mean the role of the information demand-side agents and some legal aspects related to the issue.
Hence, the following points for class discussion are suggested:
- To what extent investigation of the role of factors that are not country-related might be influential for the author’s position?
- What are the legal issues surrounding the Parmalat case?
- What measures should have been taken to prevent the Parmalat collapse?
Works Cited
Melis, A. (2005). Corporate governance failures: to what extent is Parmalat a particularly Italian case? Corporate Governance, vol. 13 (4) pp. 478-488.