Scandals from an island: Testing Anglo-American corporate governance frameworks

The purpose of this paper is to provide an account of banking scandals in relation to corporate governance (CG) failures in an emerging economy, arguing that Anglo-American ideas of CG are misplaced in traditional settings.

Semi-structured interviews were conducted with key stakeholders. Observations of annual general meetings (AGMs) and the personal working experience of one of the researchers, along with documentation, provided triangulating data on CG practices.

The authors have found that both of the banks studied had adopted CG practices contrary to the expectations of the Sri Lankan CG codes. Key features of CG practices that emerged from their investigations of these two scandals are ineffectual central bank regulations, familial boards of directors, ceremonial board meetings, biased auditing practices and manipulative AGMs, relying on traditional structures of accountability centred around families, kin and social networks.

The authors argue, drawing on Weber (1958, 1961, 1968, 1978), that the traditionalist culture mediates the process of rationality in bank governance codes and regulatory frameworks Therefore, practices fall far short of expectations.

The paper builds on the extended critique of shareholder-centric CG models and their transferability to alien contexts. It contributes to the CG studies calling for more appreciation of the need to move beyond the conventional view of CG problems as simply down to conflicts of interests. The authors complement and advance the decoupling debate in CG studies drawing on the Weberian notion of traditionalism.