Audit and Grant Thornton
Executive summary
In the dawn of 21st century, Italian company Parmalat suddenly collapsed with €14 billion in debt, which made it the biggest corporate failure in Europe history. This case provides us a good opportunity to investigate corporate governance issue in Continental Europe. In this paper will be initiated with introduction of Parmalat’s history and events review on its bankruptcy, followed by analyzing the shortcomings of its corporate governance in both internal and external aspects and finally the conclusions about why the corporate governance of Parmalat failed to prevent the scandal from happening will be drawn. Changes made by government in regulations after the scandal will be also revealed and at the end, we will put forward some constructive suggestions regarding to corporate governance for family-based business groups similar to Parmalat.
1. Company Background
Parmalat is a multinational Italian dairy and food corporation，who was always trying to style itself as the "Coca-Cola of milk". In 2002, Parmalat still ranked second in the survey of “the most famous food brands in the world”.
However, in 2003, Parmalat was involved in a financial scandal, which was considered as “one of largest and most scandalous corporate financial frauds in Europe history.” The Parmalat case represents the most important problem commonly associated with Continental European corporate governance structures, summarized as a controlling shareholder that exploits the corporation rather than monitoring its managers. Unlike Enron’s, Parmalat’s governance structure was obviously incomplete. Despite this deficiency, Parmalat had a very high investment grade credit rating, which made it able to borrow amounts of capital from investors.
2. Early History
In Italy in 1961, after dropping out of college, Calisto Tanzi took over his father’s preserved meat business, which he went on to found as Parmalat. In 1963 when a Swedish company developed the Ultra Heat Treatment
In the dawn of 21st century, Italian company Parmalat suddenly collapsed with €14 billion in debt, which made it the biggest corporate failure in Europe history. This case provides us a good opportunity to investigate corporate governance issue in Continental Europe. In this paper will be initiated with introduction of Parmalat’s history and events review on its bankruptcy, followed by analyzing the shortcomings of its corporate governance in both internal and external aspects and finally the conclusions about why the corporate governance of Parmalat failed to prevent the scandal from happening will be drawn. Changes made by government in regulations after the scandal will be also revealed and at the end, we will put forward some constructive suggestions regarding to corporate governance for family-based business groups similar to Parmalat.
1. Company Background
Parmalat is a multinational Italian dairy and food corporation，who was always trying to style itself as the "Coca-Cola of milk". In 2002, Parmalat still ranked second in the survey of “the most famous food brands in the world”.
However, in 2003, Parmalat was involved in a financial scandal, which was considered as “one of largest and most scandalous corporate financial frauds in Europe history.” The Parmalat case represents the most important problem commonly associated with Continental European corporate governance structures, summarized as a controlling shareholder that exploits the corporation rather than monitoring its managers. Unlike Enron’s, Parmalat’s governance structure was obviously incomplete. Despite this deficiency, Parmalat had a very high investment grade credit rating, which made it able to borrow amounts of capital from investors.
2. Early History
In Italy in 1961, after dropping out of college, Calisto Tanzi took over his father’s preserved meat business, which he went on to found as Parmalat. In 1963 when a Swedish company developed the Ultra Heat Treatment