When Giants Fall: Inside Corporate Collapses, Scandals, and the Governance Gaps That Enabled Them

The Fragile Trust Behind Corporate Power

Every so often, the world wakes up to another corporate earthquake. The headlines are chilling:

“Billions Lost. Jobs Gone. Leaders in Handcuffs.”

From Enron and Lehman Brothers to 1MDB, Wirecard, and FTX, these scandals expose something deeper than financial misconduct, they reveal fragile systems, weak governance, and institutional blind spots.

For decades, we’ve trusted that large corporations and regulated institutions are safe, audited, and well-governed. But when trust breaks, entire economies tremble.

“Corporate failures are rarely accidents.
They are engineered over time, often in plain sight.”

Let’s go inside these collapses, the scandals, the cover-ups, and the systemic failures, and uncover the lessons boards, regulators, and leaders must urgently learn.

Wirecard — Germany’s Fintech Mirage (2020)

Wirecard was Europe’s fintech darling, valued at €24 billion in 2018. Investors believed the hype; regulators defended it against critics. But in 2020, auditors discovered €1.9 billion in “cash reserves” didn’t exist.

What Happened

• Investigative journalists repeatedly warned of suspicious practices.
• Regulators defended Wirecard and even investigated critics.
• When auditors finally refused to sign off accounts, the company collapsed within days.

Governance Lessons

• Fast growth demands stricter, not looser, regulation.
• Board members must possess digital literacy to challenge fintech models.
• Regulator capture, defending companies instead of protecting markets, erodes trust.

Evergrande: Debt, Deception, and Delisting

From Dream to Debt Mountains

Evergrande began in 1996 as a rising private developer. By 2017, it was among China’s market darlings, judged on its rapid expansion—1,300 projects across 280 cities—with revenue soaring to over RMB 450 billion (~US$70 billion)

Yet beneath the surface, cracks were forming. By 2020, regulators imposed the “Three Red Lines” to restrain developers’ borrowing:

1. Debt-to-assets ratio < 70%
2. Net debt-to-equity < 100%
3. Cash-to-short-term debt ≥ 100%

Evergrande violated all three, triggering a liquidity crisis. The company relied on steady sales and continued borrowing to keep operations alive—a precarious balance that would soon collapse

Despite over US$45 billion in creditor claims, liquidators only recovered about US$255 million through asset sales—barely a fraction.

As of August 2025, Evergrande was delisted from the Hong Kong Stock Exchange—its valuation once in the tens of billions now reduced to mere hundreds of millions

Governance Takeaways

• Excessive leverage is a fatal vulnerability. Boards must actively manage debt, not encourage it.
• Regulatory overreach matters. The “Three Red Lines” spotlighted institutional fragility across the sector.
• Auditor independence is non-negotiable. PwC’s misconduct highlights the need for accountability.
• Data distortion masks real risks. Overstated earnings undermine stakeholder trust and delay corrective action.
• Liquidation may come too late. By then, reputational damage, legal entanglements, and stakeholder losses are systemic.

Serba Dinamik: A Local Flashpoint of Trust vs Transparency

Rapid Rise and Investor Glamour

Serba Dinamik rose quickly in Malaysia’s oil & gas services sector, becoming a Bursa Malaysia blue-chip, with investors drawn to its growth promise and export deals.

Auditor’s Doubts and Boardroom Firestorms

In mid-2021, KPMG flagged major concerns: unverifiable contracts totaling RM 3.5 billion, ghost suppliers, and dubious external confirmations. This sparked an urgency review by EY Consulting, mandated by Bursa Malaysia The Edge Malaysia.

Management’s response was astonishing: its chairman labeled KPMG a “shoplot auditor” and threatened to lobby the government against the firm

Board Turmoil and Investor Exodus

Corporate governance broke down amid board departures. Multiple independent directors resigned, citing an inability to fulfill their fiduciary duties, as a legal battle unfolded over disclosure. Market confidence vanished—Serba Dinamik’s market cap fell from RM 6 billion to RM 1.3 billion

Governance Lessons

• Auditors raising red flags must be protected, not attacked.
• Governance depends on transparency—not intimidation.
• Independent directors need legal support to uphold disclosure and integrity.
• Regulators must act swiftly to preserve market confidence.

The Institutional Void Problem

Here’s the deeper issue: scandals like these aren’t just about bad leaders or rogue CEOs. They’re about institutional voids, gaps in systems where governance exists on paper but fails in practice.

These voids emerge when:

1. Weak Boards

• Boards that fail to challenge management.
• Rubber-stamp approvals instead of exercising oversight.

2. Auditor Blind Spots

• Over-reliance on numbers without questioning assumptions.
• Clean opinions… even when warning signs were there.

3. Regulatory Gaps

• Rules exist — but enforcement lags.
• Oversight bodies stretched thin, sometimes conflicted.

4. Culture of Silence

• Employees see red flags but fear retaliation.
• Whistleblowers ignored.

      5- Culture drift: Charismatic founder or growth-at-all-costs norms silence dissent.

     6- Risk committees focus on checklists instead of real threats.

“It’s not just individuals we must hold accountable, it’s the systems that allow them to thrive.”

Until we fix these systemic flaws, the next big collapse is inevitable.

Five Imperatives for Boards and Leaders

From these scandals, five governance imperatives emerge:

1. Strengthen Board Accountability
   Boards must challenge management, not rubber-stamp decisions.
2. Demand Radical Transparency
   Insist on real-time reporting beyond glossy annual statements.
3. Integrate Risk Governance
   Treat risk as strategic, not operational.
4. Ensure Independent Oversight
   Keep boards, auditors, and regulators structurally separated.
5. Build an Ethical Culture
   Tone from the top drives behavior at every level.

These aren’t just compliance exercises, they are survival strategies.

Moving from Compliance to Accountability

Corporate scandals will continue unless we change how we govern.

Compliance frameworks look impressive on paper, but they mean little without accountability, independence, and integrity. Governance is not just about preventing failure; it’s about protecting trust, the very foundation of economies.

“We must move from compliance to accountability.
From paper policies to real oversight.
The future of our organisations and our economies, depends on it.”

💡 What are your thoughts? Are today’s boards and regulators truly prepared to prevent the next Enron, 1MDB, or FTX?

Share your views — let’s start the conversation. Reach out to us for more positive possibilities. 

Visit us at www.faisalmalikco.com or email us at admin@faisalmalikco.com to start your good governance journey.

Written by Mohamad Faisal, and these are his personal views.

Mohamad Faisal C.A.(M), CIPFA, CPSA, ASEAN CPA, CFP, DPIN has extensive experience in finance, corporate affairs, and SME development. He is a certified business mentor, chartered accountant, financial planner, and qualified business coach. He received exposure through the “Business Mentoring for Mentors” program from the Entrepreneurship Development Institute of India (EDII) and completed “Entrepreneurship in Emerging Economies” from HarvardX Business School. He currently serves as a council member of two national professional bodies, Chairman of SMP Malaysia, Accounting Industry Member of MPC, industry advisor to three local universities, and is also the founder of FaisalMALIK & Co [CA].

For consultancy and advisory services, contact the FMC team at admin@faisalmalikco.com

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