Some Major Corporate Tragedies Arising out of Poor Corporate Governance in USA

Over the recent past, a large number of companies were investigated and their directors charged with governance related offences in the US. Some of these were:

WorldCom

This phone and communications company used age-old technique of using improper accounting policies to misallocate $3.8 billion in expenses (treating them as assets instead of current expenditure) thereby inflating profits and awarding huge bonuses to executive directors. Its chairman ‘borrowed’ over $ 408 million from the company to cover personal debts.

Adelphia Communications

This communication company made illegal loans to founder Riga’s’ family members and was investigated for accounting malpractices.

Enron

This energy company created outside partnerships that helped it to hide its poor financial condition. It regularly misstated its earnings and assets, using a web of subsidiary and associate companies for the purpose. Executives paid themselves huge bonuses and also earned millions of dollars selling company’s shares that were given to them at through away prices as part of their remuneration package. The company eventually went bankrupt.

Waste Management

This garbage management company misstated its earnings by $17 billion over a six years period 1992-97. Its directors were ultimately sued for accounting fraud.

Tyco

The chief executive of this company, Dennis Kozlowski was charged with deliberately dodging sales tax on purchase of artwork for his personal residence, routing it through company books.

Peregrine Systems

This Southern California software company overstated revenue by $100 million over a three year period.

Imclone Systems

The chief executive of this company, Samuel Waksal was charged with insider trading after the company’s drug application got rejected.

Rite Aid

Three executives of this drugstore chain were indicted for charges relating to securities and accounting fraud in the 1990s.