How Good is Good Corporate Governance?

Corporate Governance definition:
The set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled.

Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, management, and the board of directors. Other stakeholders include employees, customers, creditors, suppliers, regulators, and the community at large.(Source: Wikipedia)

Good Corporate Goverance (GCG), The Big Three Words in corporate world since the collapse of giants corporations in U.S. due to fraudulent activities and financial reporting that may cause hundreds of employees lost their jobs and their pension fund.

It is closely related to a term Whistleblower: 

A person who raises a concern about wrongdoing occurring in an organization or body of people, usually this person would be from that same organization (Source: Wikipedia)

Objectives of GCG & Whistleblowing system:

Now, let's take a look what motivates companies to establish this system. It should be noted that this interpretation is purely based on my observation on 2 big companies that implemented GCG and Whistleblowing system in this country.

1. Both companies have a purpose to ensure a clean and transparent operations in the company. This system is proven to help the companies to deter any frauds occur in the companies, which could result a tremendous monetary loss. The fraud can be done internally (employees) or externally (customers, suppliers.

2. By preventing or taking action in response to any fraudulent activities, the companies could gain more profit especially when the written agreement has the provision to penalize the accused as many as 2 times or even 10 times from the calculated loss (this may include interest rates).

3. GCG and Whistleblowing system definitely could boost company's image by raising public confidence in the company's transparency to disclose any wrongdoing that may affect shareholders' profitability.

Moral responsibility:

The implementation of GCG and Whistleblowing system is seen as part of moral responsibility to ensure internal justice, reward those who provides reliable information and punish the criminals.
What about moral responsibility of the management itself? Bribery to the government is commonly used here to smooth things out when the corporations need to obtain permits in expanding their business, which causes injustice to citizens. CSR is also widely used to cover up the corrupted morality.

Referring to the definition of GCG, "Corporate governance also includes the relationships among the many stakeholders involved....employees, customers, creditors, suppliers, regulators, and the community at large", it seems unfair that the company applies this justice system only for internal but not for the corporate as a whole, especially in relations with the regulators & community at large.

Even though internal or external parties acknowledge frauds occur in the companies, they do not have enough power, evidence, and legal support to report the case to the trusted organization.

It is so unfortunate that the original purpose of this system is improperly applied.

Here, at the end of my writing, you could ask yourself about your perspective on the implementation of GCG and Whistleblowing and the moral responsibility of the management and the company as a whole.