The Cosmetic Corporate Governance – Will Companies Learn Lessons From the Global Financial Crisis!

The impact of the crises started to diminish. Still, all key players, including top executives, regulators and investors, have much to learn from the global financial failures. The Organisation for Economic Co-operation and Development (OECD) Steering group has issued a report entitled Corporate Governance Lessons from the Financial Crisis. This Report concludes that among major contributors to the financial crisis are failures and weaknesses in corporate governance arrangements. When they were put to a test, corporate governance routines did not serve their purpose to safeguard against excessive risk taking in a number of financial services institutions.

Other key contributors to the global financial crises include failures in transparency, failures in lending standards; failures in prudential standards; failures in risk-management.

As to the remuneration of top executives, the real problem was not the amount they receive; it is how companies pay them. The bad bonus culture encourages a short-term thinking: hit as many deals as you can this year and get a larger bonus! That approach pushed executives to focus their attention to achieving short term objectives at the expense of sustainable growth objectives.

Most financial institutions link compensation to quarterly performance, encouraging short-term gambles. When the bets win, executives get the rewards, but when the bets sour, as they have in the latest financial crunch, the executives who took the risks do not have to return their fat-cat bonuses. The executives were, in most cases, no longer gambling with their own net worth. It was the shareholders who took the hit. Thus the executive greed acted as fuel thrown on the fires of and contributed to the blazing global financial crisis. The right approach if we are going to keep the financial system from being misused by top executives’ greed again is to maintain a partnership between the top executives and have their net worth tied to the organisations’ well-being. As a result, they would be cautious about taking big risks and discourage the malpractice of running after short terms gains. Also, we need to replace bonuses with better, longer-term compensation such as deferred cash pay and restricted stock.

The directors of the troubled institutions appear to have provided only the thin-surfaced supervision to control the greed of top executives. The boards of the collapsed firms carry the full responsibility. Each month they see the numbers. They are also responsible for compliance with regulations. And they set the remunerations packages for the top executives. However the troubled firms just ticked the boxes for good corporate governance in their annual reports. In other words, there organisations presented an obvious example of the cosmetic corporate governance to fool different stockholders including investors, rating agencies and regulators!

The current global financial crisis has shed light on how poor risk management could lead to catastrophic results. The risk management systems have failed in many cases due to corporate governance procedures rather than the inadequacy of computer models alone.

With the advent of new products such as sophisticated derivatives and certificate of deposits, they posed unknown risks. Risk management may not have been up to the task since many of the standard quantitative models and users of these models regularly misjudged the systematic nature of risks. To some extent this was due to product complexity and over-reliance on quantitative analysis. Sadly, many risk evaluations were wrong including those provided by rating agencies.

The directors of the collapsed financial institutions should have better understanding of the risk implication at the time of taking decisions related to sophisticated products such as derivatives. The reality is many board members had inadequate knowledge on the sophisticated new products and likely were embarrassed to show that they lack the adequate knowledge! Here where directors’ education and orientation fails as best corporate governance best practice. On going education is important to ensure that the directors are familiar with all aspects of the company’s affairs with a particular focus on risks. Each director must receive customized orientation programs in areas where heshe lack adequate knowledge in order to be able to effectively undertake the fiduciary oversight role.

Finally, the concept that in bad times companies would be more interested in supporting their profitability and accordingly will not have time for corporate governance is irrational. The integrity cannot be compromised because corporate governance is not seasonal – it is for all times and must be embedded in senior corporate executives and directors. Companies must not put corporate governance on the shelf in bad times. It is like a muscle, must be exercised or it will atrophy

Omaha Hi – Learn the Basics

Omaha hi is a fascinating poker game and very easy to understand. It has two variations Omaha high and Omaha hi/lo split. There are two ways by which betting is done in Omaha poker, one through structured limit while the other is without any limit.

Before starting to play Omaha hi, it is very important to know its rule. As per the structured betting rule $2/$4 are the minimum betting edge. Let us now understand this, 2/4 means that the minimum betting amount should be $2 for the game of first two rounds and the minimum bet in the case of two last rounds should be minimum $4, this limit is also applicable in case of raising . Casino is represented by a player in the form of a dealer. Dealer’s turn comes at the end of every betting round. There is a “Button” which is also known as ‘marker’ – signifies the dealer.

Game of Omaha hi gets underway once the two blind bets are placed. The player who is on the left hand side of the dealer places the small blind. A small blind in the game of Omaha hi can be the half of the minimum bet. After this, the player on the left of the player who has put small blind places the big blind. The other participating players do not place any more money to start their hand. The marker or the button revolves around the table and all participating players according to their turn will play at the same time as the small blind, big blind and the dealer.

In Omaha hi once the blinds are placed, all participating players are given four cards with their face down. The first card is given to the small blind player while the last card is received by the dealer. Just after this first round of betting starts. A player on the left side of the big blind has a choice to place $2 to “Call” the blind bet or bring in $4 to raise the big blind. If he/she posses a bad hand he/she can also go for fold.

In this manner, the betting keeps on going until it reaches to the player who had placed the small blind. The small blind has the option to place $1 to “Call” the bet. Big blind is the last person to play. At the end of the betting rounds the player with best hand is adjudged as the winner or champion. Omaha hi follows flop, turn, river and showdown methods.