Insurance is not often discussed as an element of good corporate governance. It should be. Broadly understood, good governance is the maintenance of an appropriate level of accountability for directors and managers so that there is both transparent decision-making and an effective means to take action for poor performance or decisions. Much of the discussion about corporate governance centers on structural safeguards (for example, that board committees tasked with important decisions contain a majority of independent directors; that there are guidelines for the timing and substance of the information provided to directors in advance of meetings; and that directors are able to obtain independent advice when appropriate). These safeguards are intended to create a system of checks and balances that lead to conflict-free decisions that are in the best interests of an organization’s stakeholders. After learning that the risks of a bubble economy cannot be avoided by opaque financial engineering, it is appealing to believe that transparency in decision-making and strict rules regarding conflicts of interest will limit risky corporate behavior.Such institutional safeguards are valuable and are an appropriate focal point for legislative and regulatory reform, but they will never eliminate the risk that bad decisions might be made or… Read full this story
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