International Importance Of Current US Corporate Governance Problems.

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University of Adelaide

Master of Business Administration

Global Business - 7081

Assignment 2

International Importance

Of

Current US Corporate Governance Problems

Lecturer:                                 Dr Nicholas Mangos

Submission Deadline:                        Tuesday 5th August 2003

Student:                                E. Brian Mateer                 (1086133)

Jayson Gough                        (1088584)

Kaivan Hosseini                (1082784)

Shawn Van Groesen                (1037330)

Thien Ming Foo                 (1097241)

Word Count:                                2082 words (body of text only)



EXECUTIVE SUMMARY

Poor corporate governance has serious implications for global business and international trade.  The United States (U.S.) economy is a benchmark for global growth and therefore corporate failures within this economy creates international concern.  It is unfair to direct ill feeling solely at U.S. companies when other market based economies have had their share of failures during the self fed greed period of the last five years.  U.S. companies as motivators for global expansion must however be ambassadorial in corporate governance approach.

An excessive number of “icon” company capitalist economy corporate collapses are causing various stakeholders significant concern.  Personal angst, in the form of financial losses endured, will either reduce the supply of venture capital (both locally and FDI based) available thereby slowing corporate and technological advancement or increase the cost of funds by requiring increased return on investment.  Collectively, the loss of trust in capitalism as a stable and sustainable model of resource allocation provides non-capitalist economies a solid argument to complicate or delay opening their economies.  This slows global market expansion and reduces efficiencies created through the utilisation of comparative advantage.

Ethical corporate governance, without the requirement for legal intervention which increases the costs to all businesses, is critical to continued globalisation of markets and corporations.  Divergent political, legal and cultural principles throughout the world require that balancing the dimensions of people, planet, profit and posterity must be a core responsibility of all corporate leaders.  If these principles are not core business values, developing nations and third world countries will continue to view capitalist corporations with caution.

The changes required are systemic meaning that shareholder groups, consumers, governments and all other stakeholders must hold corporations and individuals within them to account for their decisions and actions on pain of public vilification or through the power of purchase. Much of this activity is increasing and becoming global in scope with the Internet becoming a tool enabling information dissemination instantaneously.

Investors must realise that immediate returns are not always possible. Investing in a company is a long-term joint venture that must be advantageous to the company, the individual and society as a whole; more in line with Islamic banking principles.

INTRODUCTION

(Rayman-Bacchus, Lez., 2003) “Although the current wave of globalization is the result of unprecedented scientific and technological advances, through history, movements of an international nature have been, to a large extent, about the spread of political and economic ideas across borders.

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In recent times, there have been a number of high profile corporate failures.  In many cases, Directors and Senior Managers have been held personally responsible.  Often, these failures can be attributed to poor corporate governance and as such, corporate governance has been placed under intense scrutiny.

This paper critically analyses the causes and effects of poor corporate governance in capitalist economies and the continued internationalisation of markets.  As the continued integration of markets will only occur if there is an underlying perception of mutual benefit, a bias towards the philosophical perspective rather than purely economic implications are considered.

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