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Globalization Requires Tighter Corporate Governance

Could better corporate governance have prevented the "robo-signing" scandal?

As a company evolves and expands into international markets, it's important for the CFO and other executives to maintain high governance standards and keep operations transparent.

With more countries developing regulations to maintain legal and ethical corporate activities, keeping track of all the rules and creating a culture of compliance can be difficult. However, as massive scandals such as the News of the World hacking incident or "robo-signing" mortgages at major banks show, when executives do not maintain tight oversight, problematic and illegal practices can become rampant.

The Associated Press reports that the "robo-signing" troubles - in which mortgage executives and their subordinates would rapidly approve loans without fully reviewing the applications - may have actually stemmed back to the late 1990s. As the global demand for securities of bundled home loans increased, banks had to bring in outside parties to handle the flood of paperwork. Low-level employees who were not qualified to do so were eventually approving hundreds of mortgages daily, the news source reports.

If an executive board is disengaged from the day-to-day operations of its company, it may miss key transformations and fail to see when a small or negligible problem snowballs into a major systemic issue.