Dealing with the Consequences

When disasters occur and companies engage in corrupt practices or fail entirely, the consequences are felt far wider than company boundaries. These are not victimless incidents. The externalities—the costs of failure—must all be financed and regularly it is the taxpayer and society at large that picks up the bill. We argue that for reasons that are partly structural and partly cultural (remembering, of course, that culture influences structure, and vice versa) that boards sometimes make decisions with far-reaching consequences, without being aware of what those consequences will be. Most directors are well-intentioned and trying to do their best in a difficult world. But the road to hell is paved with good intentions. The unintended consequences for which other people pay the price take a number of forms. These exogenous costs range from job losses to environmental damage, health concerns, impaired communities and even death.