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Monitoring that keeps fraud at bay

Monitoring that keeps fraud at bay
Business Daily Africa
Published: January 9, 2019
>> Monitoring that keeps fraud at bay

Sensational corporate scandals occasionally scream from newspaper headlines. In the past few months, the French carmaker Renault and Japanese auto giants Nissan and Mitsubishi’s joint collaboration grabbed world attention with the chairman sitting in a Japanese jail amid shouts from board members, governments, and shareholders.

In 2015, German carmaker Volkswagen suffered embarrassing seemingly widespread emissions testing coverup. Back in 2001, the investors saw a colossal American corporate scandal that brought down one of the globe’s largest energy firms, Enron, and accounting firms, Arthur Andersen.

In Kenya, we experienced turmoil at Kenyatta National Hospital and Deacons East Africa went under administration along with insolvency from Imperial Bank and Chase Bank.

Many corporate scandals originate from staff or management hiding fraud from boards.

Social scientists Ronald Kidwell and Christopher Martin define corporate deviance as behaviour committed by organisational members that cause or intend to cause damaging effects on co-workers, managers, clients, or the institution itself.

Many times, though, the deviant behaviour originates from the governance structure of the firm. But how and why can some corporate boards allow, condone, or conduct deviant actions? Among the thousands of business research journals, the most prestigious management publication on the planet, the Academy of Management Review, recently published an article by Ruth Aguilera, William Judge, and Siri Terjesen that explores causes for corporate governance deviance.

Deviant governance does not only mean scandalous behaviour. Deviance at board levels also includes governance actions that are not in line with best practices. Examples can include a board overtly supporting a political party, conflicts of interest, hiring family members on staff, failure to review CEO performance, holding a non-diverse mix of genders, ages, ethnicities, and skills on the board, an even number of board members, and an inactive board and its committees, among a multitude other possible scenarios.

For the full article: Monitoring that keeps fraud at bay

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