Why is corporate governance important?

Corporate governance is a system of relationships, rules, practices, and procedures that assist organizations in being directed, controlled, and regulated by means of ensuring an accountable leader, establishing policies and structures (transparency), maintaining integrity, and implementing effective policies and procedures. Keeping a solid corporate governance structure is essential for organizations to avoid fraud, corruption, and other ethical lapses. The purpose of this study is to determine what makes corporate governance breakdown and what its effects are. Does it lead to unethical behavior in organizations? Identifying lessons learned from the breakdown of corporate governance allows the organization to strengthen them. The descriptive statistics collected via an expert-led survey analyzed expert perspectives and experience reflections. Among the most critical factors contributing to corporate governance breakdown in different industries were ineffective governance mechanisms, including inadequate leadership, lack of transparency and accountability, lack of commitment, weak board of directors, lacking ethical culture, and short-term financial focus. The breakdown of corporate governance promotes unethical behaviors like corporate fraud and corruption, ultimately negatively affecting an organization's reputation and credibility. In addition to the expert-led survey, a case study examining the collapse of Theranos Inc., a company once proclaimed to revolutionize health care but ultimately collapsed because of fraud allegations. In many ways, Theranos constitutes an example of a corporate governance system that is unsatisfactory, and the failure was attributed to poor and unethical leadership, a low level of expert oversight, a secrecy culture, and a lack of transparency at the highest level. This unethical behavior resulted in capital losses, reputational damage, severe legal consequences, and, ultimately, the company's collapse. Taking steps to address corporate governance failures and ineffective governance mechanisms that cause such failures can involve external stakeholders, compliance measures, and increased regulatory requirements. Strong regulatory frameworks, good corporate cultures, and transparent processes nurture good corporate governance.