Authors: Dimitra Larda, Evangelos Manouvelos

Title: Corporate Governance and Internal Control System in the Greek Banking Sector. Lessons learned from the Folli Follie case.

Abstract

While Corporate Governance and Internal Control was not the first priority for companies before 1970, several developments which turned out to be detrimental for the investors’ interests, obliged managers to focus on these very critical issues.

Corporate Governance refers to all the processes that take place within a firm and aims at strengthening the reliability / transparency of the company. Internal Control represents an important component of Corporate Governance and refers to the framework based on which stakeholders should operate.

The objective of our analysis is to examine the issues of Corporate Governance and Internal Control for banking institutions. These issues gained importance due to the break out of the 2008 crisis. According to our findings, Corporate Governance and Internal Control system, have been improved after 2012, since fraud cases have been diminished and institutions are complying with the corporate governance codes and rules.

We then examine the Folli Follie case. The luxury brand was plunged into turmoil in May 2018 after a hedge fund, Quintessential Capital Management, expressed concern over the company's financial statements for last year and that it overstated the number of its outlets.

In the latest developments, a financial prosecutor charged on 07.12.2018, ten people with fraud and money laundering as part of the investigation into Folli Follie Group, including the founders of the brand, the CEO and board member, three other members of the board, the Chief Financial Officer, the Head Accountant, the Accountant who signed the company's balance sheet and the Group's Head in Asia.

What went wrong? Could a sound Corporate Governance and Internal Control System have prevented disaster? What are the regulatory authorities’ responsibilities? Are there any implications for Greek Business? Do we face a revival of Greek Statistics?

Keywords

Ιnternal Audit, Corporate Governance, Effectiveness, Conflict of Interests, Objectivity, Transparency