The Significance and Impact of Corporate Behavior

The corporate behavior tends to have a direct or sometimes an indirect impact on the economic state of the countries and communities they operate in. The very recent examples was the economic crisis in US, Brazil and Asia in 1998 and hard to forget ever continuing financial meltdown of the current times.

Any lack or deficiency in the corporate governance structures has a potential to threat the stability of financial structures globally.

The most important objective of a corporation is to serve social and economic goals however simple it may sound, in practice it’s the economic goals that prevail. Can there be a process to make corporation accountable for its actions and decisions.

For e.g. hundreds of people lost their livelihood after the Lehman Brothers debacle and the financial crisis that followed, but who was to be held accountable for it? A corporation also needs to act within the limit of the law, however it is interesting to observe the converse; that if there is no compliance and a corporation engages in criminal activities, there is no body to be prosecuted and punished.

It is essential to understand that corporate tend to engage in criminal behavior because the benefits outweigh the risk and the resulting costs which are enormous are borne elsewhere. And it’s the shareholders who feel the brunt from all sides, as members of the community they pay the cost of the crime itself, as taxpayer they pay for the cost of prosecution and ultimately as a shareholder they pay the cost of defense and penalties.

It is sad to note that the white collar crimes as these are not treated at par with criminal offences while the cost factor involved is much higher in the former category of offence. The corporate managers involved, rarely ever lose their jobs and the companies pay the hefty fines and legal fees.

Also, since there is no clearly established system of accountability for corporate which can be acceptable by shareholders, employees, suppliers, government; the kind of punishment for corporate crimes remains a difficult area even for the legal experts. It seems that a certain level of corporate crime is just accepted as a way of doing business.

During the recent times it has been observed that there is a direct impact of financial systems on growth and removing poverty.

The development of banking systems and market finance drives economic growth as does the role of legal foundations for financial market development; external financing and the quality of investments which bear an impact on the growth of the economy. In such a scenario, the importance and relevance of having a good corporate governance structure in place goes a long way in ensuring a better lifestyle, economic growth and prosperity for the members of the community.

To prevent the financial crisis of the current times and to make corporate behavior responsible and accountable, it is necessary that a thorough system of checks be established.

The initiative is to be taken by the government, the corporate and the legal structure of the countries in which the corporate operate and the approach should be to create a standardized structure acceptable everywhere in the world.