Financial Strategy, Second Edition

CASE STUDY 15

Corporate Governance Failures: To What Extent is Parmalat a Particularly Italian Case?

Andrea Melis

INTRODUCTION

The Parmalat situation started out as a fairly standard – although sizeable – accounting fraud. The Parmalat group, a world leader in the dairy food business, collapsed and entered bankruptcy protection in December 2003 after acknowledging massive holes in its financial statements. Billions of euros seem to have gone missing from the company's accounts. This dramatic collapse has led to the questioning of the soundness of accounting and financial reporting standards as well as of the Italian corporate governance system.

Some of the Anglophone business media (e.g. Heller, 2003; Mulligan and Munchau, 2003; Lyman, 2004) have been labelling the Parmalat case as a particularly Italian scandal, suggesting that a case such as Parmalat is country-specific and more likely to happen in Italy than elsewhere. This is not surprising as Italy is also widely represented as a bad example in the existing international academic literature on corporate governance (e.g. La Porta et al., 1997; Macey, 1998; Johnson et al., 2000). It has been argued that its reputation for corporate governance is “sufficiently bad” to let international authors on this topic “feel confident in awarding bad marks without serious field research”. Institutions of Italian corporate governance have been “translated in black and white, and some have not been translated at all” (Stanghellini, 1999, ...