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CORPORATE GOVERNANCE ISSUES AND VULNERABILITIES IN THE WAKE OF A GLOBAL FINANCIAL CRISIS

D. Deliu

Abstract

Currently, the socio-economic environment seems to be starting to go through a difficult situation, similar to global financial crisis that began since late 2007. In this respect, we emphasize what A. Einstein pointed out: „It is in crisis that invention, discovery and large strategies are born”. Not only the effects of the latest crisis are still felt, but, moreover, the imminence of a new global crisis that seems to spread its tentacles towards Europe is debated upon. This puts into question aspects related to the quality and credibility of the accounting information, but also to the transparency and effectiveness of corporate governance, especially since globalization is also reflected in the evolution of corporate governance principles. From the analysis of corporate governance scientific approaches over time, we deal with a question that only in time will find its answer: In the context of the post-economic crisis, corporate governance must be based on principles or rules? Most of this paper is dedicated to fundamental research, containing a number of debates and standpoints about the financial crisis as a fundamental concept and the corporate governance’s vulnerabilities in case a new crisis will burst in the near future. This article is part of the positivist research trend with extensive interpretative approaches, critical elements and personal opinions, which intertwine harmoniously and give the research a touch of originality and professionalism. The objective of the paper is to investigate the existing debates on issues related to corporate governance, identify its main key pillars’ weaknesses and deficiencies and provide a critical observation on how the changes caused by the financial crisis affect the corporate governance soundness and effectiveness, especially in an imminent sensitive socio-economic context. In this context, this paper aims to analyse the impact of failures and weaknesses in corporate governance on the financial crisis, the question being: what can be done to improve how entities operate? Our findings point out four key areas for urgent action: corporate risk management, pay and bonuses, the performance of board directors, and the need for shareholders to be more proactive in their role as owners. Consequently, there is a need for both attitudinal and practical changes in the actions taken, essential communication being as a survival tool. We finally concluded that deeper, profound understanding, advocating international soundproof corporate governance principles and adequate reforms are required in order to enhance the sustainable development of corporate governance’s many pillars and in order to elaborate a corporate governance code companies have to abide by. Reliability, soundness and transparency in the relationship with shareholders, clear delimitation and full ownership, optimal evaluation of the risk management function – all these are crucial in order to ensure a good, efficient corporate governance.

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