Why governance lapses are recurring
Three key factors impose a continuing and increasing stress on the corporate governance system of companies.
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DESPITE extensive reform efforts and increased awareness of corporate governance issues over the last 15 years or more, there are no apparent signs of governance lapses becoming less common. Often, history seems to be repeating itself.
Consider the cases of unauthorised trading in banks. In 1995, there was the Barings Bank scandal involving unauthorised trading in futures contracts right here in Singapore that brought down the bank. This was followed by losses of A$360 million (S$370 million) from foreign currency derivatives at National Australia Bank in 2004; 4.9 billion euros (S$7.5 billion) from European stock index futures at Societe Generale in 2008; US$2.3 billion from exchange-traded funds at UBS in 2011; and US$2 billion from credit derivatives at JPMorgan in 2012.
Non-bank companies were not spared either. In 2005, China Aviation Oil here lost US$550 million from betting on oil derivatives; and in 2008, Citic Pacific in Hong Kong lost US$2 billion through foreign exchange derivatives.
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