Corporate Governance, Accountability and Ethics in Goldman Sachs Essay Example

this transparency, to provide the Board with sufficient confidence, it is recommended that the projections will be achieved. This essay will examine some of the Goldman Sachs’ corporate governance principles with specific regards to code of conducts and principles of responsibilities. 2. Corporate governance To develop and improve standards of corporate governance failure occurred often in accordance with the Corporate Governance emphasis on areas of particular concern. Is sometimes described as the worst financial crisis since the "Great Depression" the current turmoil in the financial nstitutions. Therefore, it is the nature of the examination and assessment of the main lessons of corporate governance in the banking industry as a whole. 2. 1 board responsibilities The members of the Board of the quality of bank regulators often set the fit and proper test of particular concern. However, this test does not completely problem-solving skills to oversee an important business, this is an issue for shareholders and other stakeholders. The Board's ability to outsiders and the fact it is extremely difficult to determine.

However, it is often asserted, the bank's board of directors that the lack of banking and financial experience. One study estimates that eight major financial institutions in the United States, two-thirds of the directors there is no banking experience. (Guerrier, F. and P. Thal-Larsen, 2008) In addition, many of the directors of the financial background of a highly technical board covering the audit and risk committee. The Goldman Shacs Inc. group states that’ the board’s responsibility is to provide direction and oversight’.

However it clearly has failed this responsibilities through the sales of its low quality subprime products and services. Moreover there

is no penalties imposed on those who violate those responsibilities which on the other hand could encourage those kind of behavior. Moreover there are specific responsibility for board to evaluating its CEO whereas the CEO of Goldman Sachs Lloyd Blankfein is still in the position until today. Even after all those turmoil, he is still in charge of that giant financial institution. 2. 2 risk taking of the board

Information transferred to the Main Board of the organization, including corporate governance dimension, are not usually sufficient to make informed decision or overload to distinguish between useful and clouding ones. While in principle to do the oversight responsibilities of the board of directors of the risk management, internal management issues highlighted in this section is not very clear treatment. Attention in recent years has focused on internal control over financial reporting, and the need for an external examination.

However, it needs to be emphasized that internal control is at best risk management and a wider range, which is a key issue of corporate governance, may not get the attention it deserves, it's a subset of, but in fact, enterprise risk management framework has been in use. Despite the emphasis on risk management, regulatory and corporate governance principles, the financial crisis has exposed serious shortcomings practice, both in internal management and supervision and risk management systems, the role of the board of directors of a number of banks.

While nearly all reviewed by the Senior Supervisors Group (2008), 11 major banks did not anticipate the severity and nature of the recent market pressures fully, there are significant differences in large part determine how they

affect their senior management structure and their risk management system, the nature of both supervised by the Board of Directors. The operation of the risk management systems in the technical sense, does not affect the company, unless the transmission of information through effective channels, which is a clear corporate governance issues.

Risk management is an integral part of corporate strategy is not just to avoid losses in the enterprise, but also to seize new opportunities. However, the excessive focus seems to have been for the purpose of corporate reporting to the financial risks and internal control and responsibility through the Audit Committee of the board of directors. (OECD, 2009) This positioning is too afterwards. Risk management strategy is forward-oriented, stress test, also introduced an important role. The financial crisis has shown that the risk management needs of an enterprise-class commitment, not only implemented in a particular product line.

In fact, with the current level of outsourcing may be the company's economic borders wider than its legal form. Board strategy and related risk management has the primary responsibility. However, good risk management must be implemented throughout the organization, its business in a manner to be part of. Accordingly, the Board must oversee the company's structure and its culture, but also to ensure that reliable and relevant information flow board implementation of the strategy and the associated risks. 3. Code of ethics

The purpose of Code of Ethic is the governance of companies listed on regulated markets, adjust the division of roles between shareholders, the Board of Directors and executive management more comprehensive and need to pass legislation. Good corporate governance, strengthen confidence in

the company, and helps to ensure the maximum possible period of time to create value for shareholders, employees and other stakeholders' best interests. Management of listed companies a significant proportion of the assets of the country, and generates an important part of the value creation.

Therefore, it is for guidance and control in an appropriate and satisfactory manner the interests of society as a whole. Code of Ethics to shareholders of listed companies, capital markets and strengthen confidence between the parties concerned. Importantly, enterprises enjoy the society as a whole, a good working relationship, especially with their business activities affected by the stakeholder groups. Therefore, enterprises should pay close attention to their activities, taking into account these problems to develop. 3. 1 personal conflicts of interest

Goldman Sachs found many ways to create your own income and profits. Sometimes their methods lead to conflicts of interest, for example, Goldman Sachs sold toxic mortgage-backed securities CDOs, their customers, and not to let them know, failed bets on Goldman's mortgage market. Another example of Goldman Sachs to embrace conflict: the banks have begun to purchase warehouse storage, waiting to be sold, in which the metal. Goldman Sachs to collect the rental of storage facilities, but also left a lot of space in commodity trading.

Unfortunately, those wishing to visit the metal had to wait too long to deliver higher prices, even when the power is sufficient. The prices were driven up by artificially induced shortage of metal long wait time. Their code of ethics clearly states that when your private interest improperly interferes with the interests of the firm which includes the firm’s clients,

any actions would be prohibited unless approved by the firm. Here there is nothing wrong with this code, whereas how to implement this code is of primary concern for Goldman Sachs. 3. 2 protecting confidential information

In today's competitive market, companies need to be as innovative as possible thriving business environment, and keep up with the pace of progress. To this end, the development of and access to useful information, to create and provide new and improved products and services is essential. Information technology, the company's products are unique, prototype or key customer list just a few examples of business information. The latter so you can have great commercial value and significant about the importance of uncontrolled disclosure may lead to serious consequences. Focus on confidentiality, a lot of these days.

Privacy laws become more stringent, there have been a variety of business, data protection, information security, and even insurance. ‘A former Goldman Sachs director accused of feeding confidential information to a corrupt hedge fund manager has been convicted of conspiracy and three counts of securities fraud’. (DailyMail, 2012) This exact kind of behavior is intolerable for companies of any sizes. There code of conducts emphasizes the importance of protecting confidential information whereas their action against this kind of practice is not serve enough to discourage them.

In other words again, the code is very practical but the penalty for offenders are not strong enough. 3. 3 public disclosure The Goldman Sachs disclosure policy requires all information in their public communication to be full, fair, accurate, timely and understandable. They also specifically emphasizes that knowingly misrepresenting, omitting, or causing others to misrepresent

or omit, material facts about the firm to others, whether within or outside the firm, including our independent auditors are prohibited . GlodmanSachs, 2013) This is an excellent code of ethics that help shareholders understand where their investment’s position is and protect investors with further options. By the time, the finical crisis occurred although Goldman Sachs was not the first mover, it still failed to exercise this code. Moreover, it failed to disclose material information about CODs and other subprime products to the public before it was brought to attention. However as public listed companies they should have made immediate disclosure. 4. Principles of accountability In a market economy, anyone must face the economic consequences of their actions and decisions.

If the adviser's opinion negligence or non-compliance with the minimum professional standards, they can sue, and pay compensation for the damage they caused. State responsibility and infringement of legal services to compensate those unjustly damage, such as caused by negligence or overly risky behavior or the purpose of dangerous products. But they also prevent such behavior. For a person must pay the professional standards, if the work injury caused by careless or avoid erroneous opinion, obedience, as a strong incentive to improve the quality of products and services.

The success of the market economy is a connection-based decision-making and risk. Accountability is a vague concept subject to multiple interpretations and understanding. This is the process of the commitments made by the organization to respond to and balance stakeholder needs in its decision-making processes and activities, and to provide for this commitment. (Blagescu, 2005) Organizations focus on accountability found that it will lead to

increased credibility and legitimacy with stakeholders, to strengthen the governance structure and improve organizational learning and innovation.

In view of the impact of the organization's actions are often diffuse responsibility should think so. This view emphasizes accountability organizations respond to the needs of the many stakeholders. According to Blagescu, to be accountable, an organization needs to integrate four main aspects into its policies, procedures and practices at all stage. They are transparency, participation, evaluation, and response mechanisms. He believe that the higher the quality and embedded in the organization's policies, processes and procedures, organization and implementation of more responsible.

In addition to responsible organizations need to integrate all of these factors into their policies, procedures and practices at all levels of decision-making and implementation stages, the relationship between internal and external stakeholders. In addition, evaluate to ensure that an organization is responsible for its performance, it is to achieve its goals and objectives, and it was agreed standards. It allows organizations said they had achieved what kind of impact they have stakeholders, but also allows the organization held by the stakeholders, they said they would do.

Finally, through response mechanism, investors can be held by an organization taking into account by querying a decision, action or policy, and received adequate response to their grievances. Goldman Sahcs did have three of these components transparency, which didn't execute very well; participation, which worked great as the policies are embedded with all levels of their affairs; evaluation, which didn't achieve the desired outcome, or else there will be a stop long before be financial crisis burst. But all these unsatisfactory efforts are not the most

critical contributor to its financial bubble.

It is the missing response mechanism where enough information about the clients’ concerns piled up that leads to the full burst of the financial crisis in Goldman Sachs. 5. Conclusion During the financial crisis, Goldman Sachs did not fulfil their board responsibilities as a result of insufficient penalties and the risk management system was of lots of flaws which consequently contribute to the loss of the business. Even though their corporate governance policies was made very well, their incompetent execution skills led to the fail.

Furthermore, the ethic codes in Goldman Sachs didn't successfully shape the company to a more responsible enterprise. On the other hand, it became a moral highroad where no employees desire to achieve. Finally as a lack of properly monitored accountability mechanism, the board couldn't ensure public consilience after the crisis burst. Reference list Bainbridge, S. 2012, Corporate Governance After the Financial Crisis, http://www. professorbainbridge. com/professorbainbridgecom/2012/11/corporate-governance-after-the-financial-crisis-reviewed. html, viewed 06/04/2013

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