Corporate Governance Study Parmalat
Parmalat’s ‘ethical bankruptcy’.
Ethics is about choice and the values that guide us and the standards we use.
Questioning what principles maybe at stake and how we choose or priorities between them. An ethical approach to a problem will enquire about end-results and the route or means we use to achieve these objectives together with the relationship between the two (‘end versus means’).
Corporate Governance can be defined as a proper structure of rules and practices, a reference point to return to where decision making is influenced which invariably helps a company run smoothly reducing confusion, ambiguity and ultimately risk.
Shareholders own a company’s assets; management, overseen by a board of directors, acts as a steward over those assets; yet most shareholders have neither the ability nor the resources to effectively exercise their rights to nominate and elect members. This structure creates economic incentives for managers to focus on their own interests and neglect those of shareholders.
Following decades of exponential organic growth Parmalat stepped up its acquisition programme in the 1990s crossing many time zones using an aggressive and heavily leveraged strategy. By the end of the decade Parmalat was a complex web of 170 companies which had hid losses overstated assets/sales, understated its debt, and diverted company cash to Tanzi family members. In their 2004 New York successful class action suit brought against the company by a plethora of stakeholders a selection of the allegations included: Illegal money transfers to Tanzi family companies, the creation of offshore financially engineered shell companies(Bonlat),recycling old invoices in factoring arrangements to boost its ability to issue debt.
Whilst many of the above allegations would become difficult to prove in a court of law given the evidence that was shipped to Parma from their US lawyer’s office for destruction, by the time the scandal played out life, health, assets and freedoms would
Ethics is about choice and the values that guide us and the standards we use.
Questioning what principles maybe at stake and how we choose or priorities between them. An ethical approach to a problem will enquire about end-results and the route or means we use to achieve these objectives together with the relationship between the two (‘end versus means’).
Corporate Governance can be defined as a proper structure of rules and practices, a reference point to return to where decision making is influenced which invariably helps a company run smoothly reducing confusion, ambiguity and ultimately risk.
Shareholders own a company’s assets; management, overseen by a board of directors, acts as a steward over those assets; yet most shareholders have neither the ability nor the resources to effectively exercise their rights to nominate and elect members. This structure creates economic incentives for managers to focus on their own interests and neglect those of shareholders.
Following decades of exponential organic growth Parmalat stepped up its acquisition programme in the 1990s crossing many time zones using an aggressive and heavily leveraged strategy. By the end of the decade Parmalat was a complex web of 170 companies which had hid losses overstated assets/sales, understated its debt, and diverted company cash to Tanzi family members. In their 2004 New York successful class action suit brought against the company by a plethora of stakeholders a selection of the allegations included: Illegal money transfers to Tanzi family companies, the creation of offshore financially engineered shell companies(Bonlat),recycling old invoices in factoring arrangements to boost its ability to issue debt.
Whilst many of the above allegations would become difficult to prove in a court of law given the evidence that was shipped to Parma from their US lawyer’s office for destruction, by the time the scandal played out life, health, assets and freedoms would