How to ensure Parmalat's fraud never happens again

Author: | Published: 1 Dec 2005
Bruno Cova, Paul Hastings

The Parmalat fraud prompted a review of corporate governance in Italy and led to reform of insolvency laws. But the response has been too limited, according to Bruno Cova, former adviser to Parmalat administrator Enrico Bondi and now co-chair of Paul Hastings' Italian office.

"Rulemaking is not the answer to corporate wrongdoing," Cova told IFLR. "We have to create a culture that encourages a more ethical approach and rewards responsible behaviour."

Regulation, in reaction to financial fraud, can make doing business more expensive and slash corporations' and markets' efficiency, says Cova. The cost to US companies of complying with Sarbanes-Oxley regulation has been estimated at $1.2 billion in total, with the annual cost of assessing fiscal controls averaging $4.3 million for each company.

Building a culture of good governance might be a cheaper and more effective means of combatting fraud. "If we are...