Essays on Fraud and Failures in Corporate Governance - Parmalat Case Study

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The paper "Fraud and Failures in Corporate Governance - Parmalat" is an outstanding example of a business case study.   Strategic communication may not be considered as the fundamental basis on which organizations may succeed. Instead, there is a need for the consideration of the diversity of perspective and tolerance of dissent as these are the impetus of making critical decisions for a civil society. This was a case of the failure of Parmalat. This paper discusses the process of communication and risk management in reinforcing organizations management through existing infrastructure within the organization to help prevent fraud as it occurred at Parmalat in 2003.

Its collapse has brought a number of questions on the completeness of communication including the reliability of the Italian corporate governance system. The assessment will be done based on the point of view of actors or components within the system and theoretical models underpinnings the same. Background information on the collapse The economic issue of the Company can be traced years before its collapse. The management, however, convinced the then-existing stakeholders that the Group was healthy and operating efficiently (Epstein & Buhovac 2014).

In as much, in the month following December 2003, a number of events unfolded raising concerns that had been expressed earlier concerning the Company’ s operations. For instance, the Company had a complicated organization structure that comprised of over one hundred and seventy subsidiaries (170) (Acharya et al. 2013). First, with this kind of structure it meant that leaders tasked with the responsibility of introducing agenda to other stakeholders must know how to articulate it until there will be broad acceptance of the nature of the issue otherwise it was going to be difficult to move on if stakeholders are not convinced.

Secondly, there lacked a transformative explanation. A transformative explanation begins by discussing the audience’ s implicit theory and showing why it is plausible (Johnson et al. 2011). The consequence of the Company lacking transformative explanation led to cash flow between the parent company and the subsidiaries. The cash flow consisted of a subsidiary in the Cayman Islands which is considered as tax heaven; further complicating the process of monitoring the cash flow between the subsidiary and the parent company (Epstein & Buhovac 2014; Ellul 2015). Communication Frailties at Parmalat Going by recent research on management communication in organisations, application of the theory of communicative action is what Parmalat Group lacked prior to its collapse.

The collapsed of Parmalat Group has not only brought a number questions on the soundness of the financial reporting standards, the soundness of the accounting standards including the reliability of the Italian corporate governance system but also theoretical models of communication in an organization and in particular, the dialogic theory of public speaking which understands public speaking as a dialogue between speaker and audience (Harford & Maxwell 2012; Acharya et al.

2013). This case illustrates the old problem of shareholders who failed in their oversight role in monitoring the Company’ s managers instead, exploiting the Company on what was known as the continental European governance structure. The Company’ s management structure failed in the identification of real challenges that were affecting it, especially when it came to the ones demanding the attention of the organization.

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