4 Factors Influencing Corporate Governance
Since the late 1900s, several factors enabled a marked increase in the frequency and scale of corporate disasters and scandals. These factors include notably:
Due to globalisation markets are global and connected as never before - natural boundaries and limits that existed before globalisation no longer exist, so problems can reach and spread far wider than in earlier times.
The vast modern scale of technologies and the sheer size of things that organisations now create and process, in every sector, increase the scale of the potential damage of corporate wrong-doing.
- For example, consider the enormous scale of manufacturing,
production, commodities, machinery, transport, construction, IT, the web and so on compared with a generation ago. The maxim: 'The bigger they are, the harder they fall' is very apt. When something goes wrong in modern times, the impacts are potentially bigger than ever in history.
Volumes and densities of populations everywhere have increased dramatically since the late 1900s. Where corporate scandals and disasters happen, the potential to affect vast numbers of people has never been greater.
4. Free Market
Since the late 1900s, the fondness of (mainly 'western') governments for 'free market' capitalist economics (basically the view that market forces should be kept free from interference) has encouraged the development of unregulated major risk-taking in organisational governance - and this style of running organisations has now become deeply embedded into corporate attitudes.
- Most corporations are run in an extremely selfish and greedy manner - Short-term gain and the enrichment of directors and senior staff continue to drive corporate strategy and decision-making. In combination with the other factors, this creates a potent recipe for disasters of all kinds.
Given that these factors are likely to persist in offering progressively greater potential for the negative impact of corporate activity on societies, economies and the environment, people are increasingly calling for substantially improved visibility and controls in Corporate Governance.