Transcription of The Corporate Governance Lessons from the Financial Crisis
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The Corporate Governance Lessons from the Financial Crisis
ISSN 1995-2864. Financial Market Trends OECD 2009. Pre-publication version for Vol. 2009/1. The Corporate Governance Lessons from the Financial Crisis *. Grant Kirkpatrick This report analyses the impact of failures and weaknesses in Corporate Governance on the Financial Crisis , including risk management systems and executive salaries. It concludes that the Financial Crisis can be to an important extent attributed to failures and weaknesses in Corporate Governance arrangements which did not serve their purpose to safeguard against excessive risk taking in a number of Financial services companies. Accounting standards and regulatory requirements have also proved insufficient in some areas. Last but not least, remuneration systems have in a number of cases not been closely related to the strategy and risk appetite of the company and its longer term interests.
In June 2007, credit spreads in some of the world’s major financial markets began to increase and the first wave of significant downgrades was announced by the major credit rating agencies. By August 2007, it was clear that at least a large part of this new risk aversion stemmed from concerns about the subprime home mortgage market in the US3
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