Question

Where does the corporate governance fit in in the financial crisis?

Answer 1

One of the major causes of the financial crisis was failure of corporate governance in many financial institutions. Below are few points which tells that how weak corporate governance leads to financial crisis:

1. In many boards there was not proper wall between there operational activies and risk management which leads to ignoring the risk regulations and guidelines.

2.Many board of directors were working on their own interest rather than on investors interest which lead to more risk taking.

3. Proxies access to the vote further these board member to implment there risky strategies.

4. Even after few banks get bankrupted their CEOs got high severance packages which shows that there is nexus between the BoD and they were not much concerned about the investors.

These all points shows that widespeard failure of the corporate governance in these financial firms durig financial crisis.