Reasons behind the Financial Crisis Essay Example | Topics and Well Written Essays - 750 words

Reasons behind the Financial Crisis - Essay Example palliate on torts, directors can be held liable due to their subordinates both beneficial and non-beneficial. The financial crisis is fostered by embarrassing decision making poor planning and general laxity in troubleshooting. These problems accrue from middle vigilance personnel, but a director is liable (Berlatsky 3). Directors can be held liable for breaching fiduciary duty to the corporations they run. This position arises when a director tries to avoid conflict of interest such that, through their actions or omissions, they are doing an injustice to the corporation. An example is when directors knowingly enter into set abouts that are financially inappropriate for their companies. The directors view their personal interests in the contract to be of greater value. Most directors have a tendency to act outside their authority in regard to letters patent and other corporate governing documents. Such decisions consequence in defalcation of company resources, poor enthronization decisions and an inevitable financial crisis (Berlatsky 34). Directors are also liable for Risk vigilance in regard to the investments made by the company. However, this liability extends even more to the Gate keepers. Gatekeepers include lawyers, comptrollers and investment bankers. This group of professionals plays a significant role in advising the directors on what ventures they should and should not undertake. The first group is the accountants. An accountants failure to comprehensively account for the acquisition and use of financial assets, therefore, is equal to the failure of the company. enthronization bankers should transparently render their advice on which ventures are more profitable than the others. Most investment bankers lack transparency owing to their self serving motives this led to increased debt burden or over-leveraging. Another crucial freshet of professionals is the lawyers. Their work should be to ascertain the legal financial implications made by a director and in extent the company they represent. These professions collectively failed to render their services effectively and with efficiency. They also did not uphold rightfulness especially in regard to safeguarding company assets. Finally, they did not comply with the law especially in soft of contract procurement (Hamdani & Olin 56). The most eminent failure of internal and external auditors is fraud. Auditors are the main blab blowers in regards to a corporations failure and success despite how minimal. In the event that they unloose a blind eye to illegal, inappropriate activities of a company in managing and investing finances the result will be a financial crisis (Hamdani & Olin 78). Notable failures of credit rating agencies are apparent in the following three areas Ratings methodologies in this case, most of the credit rating agencies did not follow the recommended rating methodologies. in that location are als o reports of the ratings leaking to interested parties before publish which is surmountable to fraud. This unfair rating systems contributed to the great compute of poor financial decisions made that led to the financial crisis. Fiduciary legislation managing conflicts of interest the agencies do not have clear cut policies to manage cases of conflict of interest. This is especially notable in instances where the issuer holds large shares in the firm. Timely, accurate disclosures credit rating agencies are slow to disclose errors and fix them especially in reg