Dimensions of the global financial crisis: the future of corporate governance and regulation

Article type: Research Article

Authors: Ruppel, Conrad C H

Affiliations: University of Waikato, New Zealand

Note: [] University of Waikato, New Zealand

Abstract: This article examines corporate governance and regulation in the context of the current global financial crisis (GFC). Taking into account the concept of government and self-regulation as well as the danger of contagion and systematic risk, it is demonstrated that a complex web of interrelated failures – in both corporate governance and government regulation – have not only caused but also prolonged the GFC. Executive compensation, ERM systems, CEO-Chairman duality, as well as independence and competence of the board of directors not only defines an area for possible regulatory reforms but also reveal the ability of companies to effectively use the freedom being associated with the notion of self-regulation. Examining government regulations, such as residential, tax, finance, and monetary policies in the US and other countries, as well as international banking supervision accords (Basel) illustrate that not only failures in corporate governance but even more a number of government regulations were causal for the GFC. In addition, recent state interventions and draft laws, that is, monetary measures and restrictions for short-selling and executive compensation, indicate the danger of overregulation and the implementation of further imprudent policies. This article recommends concrete steps to be taken by companies and governments in order to address revealed weaknesses and correct existing failures. In some cases, especially in crisis management, new government regulation and interventions are unavoidable but should be based on appropriate diagnoses of the root problems and important principles such as transparency, risk control, and international cooperation.

DOI: 10.3233/IJR-120086

Journal: International Journal of Regulation and Governance, vol. 9, no. 2, pp. 71-98, 2009