Best Practice Corporate Governance? The Failure of Bridgecorp
32 Pages Posted: 25 Nov 2010 Last revised: 28 Jun 2011
Date Written: November 24, 2010
Limitations in regulatory structure and corporate governance contributed to the recent collapse of the finance company industry in New Zealand. This is illustrated by the Bridgecorp Finance Ltd failure. Bridgecorp was, by some measures, a successful company as it maximised the wealth of its owners; however this was at the expense of depositors who may have believed they were protected by New Zealand prudential regulation. Instead regulations which should have offered some protection to depositors were used to obfuscate the true financial situation as the Securities Commission, Trustees and Auditors appeared to be more concerned with compliance rather than the substance of underlying transactions. This allowed substantial shareholders on the Bridgecorp board of directors the opportunity to disregard the interests of depositors while paying lip service to best practice corporate governance. Tragically, warnings given as early as 2003 of possible NBDT failures such as Bridgecorp, went unheeded. The costs of failures were borne by depositors, taxpayers and the New Zealand economy as a whole.
Keywords: Corporate Governance, Prudential Regulation, Non-Bank Deposit-Takers, Financial Crisis
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