Infectious Greed

Posted in Finance, Accounting and Economics Terms, Total Reads: 260
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Definition: Infectious Greed

In the year 2002, there were several instances of loopholes in the corporate governance and there was a virtual breakdown in the checks and balances in the systems. This was a cause of major concern considering the fact that there were gaps that could cause rigging of the system to give unfair advantages to certain players in the market.


The phrase “Infectious Greed” was first used by former Federal Reserve Board chairman Alan Greenspan when he was speaking in front of the Committee that looked at Banking, Housing and Urban Affairs I the year 2002.


Mr. Alan Greenspan was telling about changes and reforms that were the need of the hour in the corporate governance to ensure that the rights of shareholders be protected.

Due to mishaps because of lack of corporate governance, the interests of minority share holders are generally taken for a toss. It was observed by him that many corporate executives were trying ways to reap stock market gains by using the wrong means and practices. The people who stood as guardians of the information pertaining to the financial world were overwhelmed. The wrong desire to keep the stock prices move northwards, there were cooking up of books by inflating the numbers.


A highly profitable spread of share holdings among the managers gave them encouragement to further cook up the books.


This greed of making a fast buck by misrepresentation of facts and using the same to make handsome gains had gone infectious among the business houses. This greed soon spread a lot and there were serious lapses in Corporate Governance. The credibility on the street had gone down and the interests of the shareholders were taking a major hit.

 

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