Corporate good and bad governance

Corporate governance is an instrument with which we try to contain and control the conduct of capital that is presently flowing across and over national borders, sometimes to bring in the much-needed economic development but on many occasions creating havocs. There are cases of good governance by Tatas, Microsoft, Maruti Udyog Ltd., etc. Now, we hear about bungling in BEML to push the sale of substandard trucks to the Indian Army. In the past couple of years we have heard quite a lot about the debacle of giant corporations both nationally and internationally. There has been failure of Lehman Brothers in the USA which triggered a credit crunch in financial market leading to economic recession all over the world. Later we heard about the collapse of Satyam Computers in India. Even earlier also there have been collapses of the giant corporations. The root cause for this debacle is the financial mismanagement of the companies or simply it can be stated as financial scandals. Therefore these financial scams clearly establish the vulnerability of corporations to manipulations by unscrupulous managers and also that there is a potential risk involved in corporate governance if proper model of financial management is not adopted and implemented. Queen Elizabeth visited the London School of Business in October 2008 and asked the Professors there why nobody watched the issue of credit crunch even though it was a universal problem. To which a Professor of Economics replied that the ‘financial wizards’ lacked imagination. This is, in fact, another kind of risk involved in corporate governance. The paper presents the all aspects of corporate good and misgovernance, the relationship between company's management, its board, its shareholders and its stakeholders and identifies the various forms of risks in the governance of corporations. It presents a thorough analysis of financial management, the loopholes in its mismanagement, and suggests ways of mitigating risk involved in accounting procedures and ensuring transparency thus avoiding total collapse of the corporations.