Mcbride Financial Services Governance Evaluation

Running head: McBride Financial Services Governance Evaluation

McBride Financial Services Governance Evaluation

Ivie Imoisili

MMPBL 570: Corporate Governance

University of Phoenix

McBride Financial Services Governance Evaluation

The corporate governance scandals of the 21st century rocked the financial markets and shook up investor confidence in corporate governance. The executives at Enron misrepresented the financial health of the company, the executives at Tyco used the company as a personal piggy bank, and Arthur Andersen was more interested in keeping their dishonest client happy and their coffers well filled than with discharging the duties of their office. As a result, new measures have emerged that are meant to encourage transparency and openness and to build up the confidence of investors. This paper will examine some of the problems that exist today as it relates to corporate governance; it will discuss two rating methods that are being used by rating companies today, the reaction of Corporate America to the governance ratings, and how these all tie into the issues being faced by McBride Financial Services, Incorporated.

Corporate Governance Problems

One of the biggest governance problems that led to one of the biggest corporate scandals of the 21st century was conflict of interest between the two roles played by Arthur Andersen. Arthur Anderson played the role of auditor of their financial reports and also their consultant. Since Arthur Anderson was responsible for certifying the financial statements of Enron, providing business consultancy services was a conflict of interest because the “advice” the company dished out to Enron was also leading to the “profits” on their financial reports. Andersen knew that Enron employed risky accounting methods but still the company chose to certify their financial statements and one cannot help but wonder if this was somehow tied to the consultancy services that the company provided. Conflict of...