Essay on Parmalat Scandal

4365 Words Apr 24th, 2016 18 Pages
Corporate Ownership & Control / Volume 2, Issue 2, Winter 2005

РАЗДЕЛ 3
УГОЛОК ПРАКТИКА
SECTION 3
PRACTITIONER'S
CORNER

INVESTORS TRUST AFTER PARMALAT SCANDAL: THE ROLE
OF CORPORATE GOVERNANCE
Giovanni D’Orio

Giovanni D’Orio, Department of Economics and Statistics, University of Calabria – Rende (CS) Italy. Contact: gio.dorio@unical.it 1.1. Introduction
The collapse of the Parmalat food empire reveals a troubling aspect about Italian capitalism - the lack of effective financial control over its family-owned companies. But was Parmalat scandal a pure problem of corporate governance or was it simply a “fraud”?
Bearle and Means (1932 pg. 6) famously explained:
“The separation of ownership from control produces
a
…show more content…
The possible way to separate ownership and control has not been based on a unique model but on a set of different models: the system was selforganising given the fact that in Italy there has never

Corporate Ownership & Control / Volume 2, Issue 2, Winter 2005 been a law on corporate governance issue. The model is actually based on the following devices:
1. Hierarchical group. The most frequent corporate governance model; it accounts for 52 per cent of manufacturing activity and is more frequent among larger firms.
2. Family control. The second most relevant model. This is the case where family links exist among controlling shareholder.
3. Coalition control: is a model quite similar to the previous one but more complex. The trust-link between entrepreneurs and investors is based on their sharing common values (belonging to the same industrial district, to the same political party etc.).
4. Financial supervision. Financial guarantees to non-controlling shareholders are represented by the presence of financial companies with privileged information exerting monitoring (banks, merchant banks, institutional investors etc). This model was basically absent

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