Corporate GovernanceEssay Preview: Corporate GovernanceReport this essayIn the recent years, the public and business community have been exposed to many corporate scandals and accounting fraud by the managers of the company. In 1997, the financial crisis brought huge damages and requires many efforts done in order to strengthen the business control and foundation of the companies. One of the important lessons learnt from the financial crisis in 1991 is the weaknesses in the governance of the company such as too much power is given to a single person managing the company, weak internal control and poor coordination of directors that lead to failure of the company. Due to these problems, a total regulatory and governance were embarked all over the world. For example, The Sarbanes Oxley Act was established in the US while in the UK, The Code of Corporate Governance was extensively revised as an objective to stop all these corporate scandals from spreading towards the global business community.
Many developed and developing countries across the world is unable to run away from a number of corporate scandals. One of the most significant corporate collapses includes Enron, which is known as the worlds leading company in the past. The Enron scandal brought a huge damage towards the worlds financial sector and economy. Among the causes of the Enron collapse are the conflict of interest between the two roles played by Arthur Andersen, as both auditor and consultant to Enron, the lack of attention shown by members of the Enron board of the directors to the off-books financial entities dealt business with and the lack of truthfulness by management about the health as well as its business operations. Also, when some of their business and trading ventures began to perform poor, they tried to cover up their failures. As a consequence, Enron was filed with bankruptcy and many employees lost their savings as well as their jobs (The Economist, 28th November 2002). Banks, suppliers and customers of Enron were also badly affected by the company collapse. As such, a strong lesson can be made to say that the board of companies must conduct their duties, not only to promote interest of the shareholders but also the welfare of the companys employees, creditors, customers as well as community at large.
Although there have been recommendations and efforts by various parties to eradicate these scandals, unfortunately it is still occurring and there is no sign that it will stop or even reduce in the future. This has been indicated in KPMG Malaysia Fraud Survey Report 2009 who revealed that a total of 61% of the respondents believed that fraud would rise in the next two years by which more than three quarters of the respondents believed that financial statement fraud will continue. In Malaysia, there are several corporate scandals that post a constant threat to the regulatory structure, public trust and confidence in the market economy. (Buang, 2010). Among these examples are the Transmile Group Bhd controlled
-Bhdr. In 2006, one of the main players of the company, TransMaidan, bought a stake in BHKM and created the TransMarse Holdings, a registered office of the Malaysian banking and insurance firm. They subsequently held an initial public offering of a stake of $2.8 billion, having taken several meetings and discussions in various Chinese cities and even offered BHK and BNY Mellon the stake as the new investment option for their P2P investment. The fact that the initial investment was a very generous offer of 50% is a significant statement of business risk that may be well placed before any other type of public offering of a holding of a company. (Buang, 2010).
There are, however, two major problems with this statement: Firstly, it is not simply a very generous offer, it is not an accurate summary of all of the actions taken by TransMaidan or BHKM against the company. For it to be considered the best offer, the transaction must be between the parties. Furthermore, the agreement between the parties is also far from satisfactory when a third party acts out of its own interests (Buang, 2010). This situation is further compounded by the fact that the agreement states that a third party will act unilaterally, in a manner never witnessed before in any investment contract; or that an existing partner or joint venture partner will not even be contacted to negotiate. So it comes as no surprise when a third party acts out of its own interests, taking the entire enterprise. In short, BHK may not know or understand what was done or did not involve TransMaidan in its own interest (Buang, 2010).
As to the second problem, it is not just the lack of transparency and transparency in transmigration, but the fact that there is neither a simple right to move money nor a clear and effective path to legal recourse to avoid a future or similar insolvency, which is a major problem in Malaysia. As mentioned, TransMaidan’s decision to buy a stake in Bhd only resulted in a legal action taken by the Malaysian authorities to ensure the continued availability of the funds and that the company could continue the continued operation and activities. In the end, this litigation only became a distraction and a way to keep TransMaidan out of the red. The Malaysian authorities now have to take the final step – which is to give BHK and TransMaidan time to develop the necessary financial and legal tools and techniques (and they cannot make the decision without the cooperation between the parties). There is thus no way this new move in transmigration can be stopped and the Malaysian authorities have to make a decision that protects BHK, TransMaidan, and its people, on the basis of all applicable legal considerations (Coger, 2010).
Conclusion
Transmigration in Malaysia has been a