Power imbalance and corporate failure

POWER imbalance often occurs when authority is concentrated on a single individual or a few executives, and it is at the heart of corporate mismanagement, corruption, and abuse of power. Concentration of power often restrains diverse perspectives and critical debate. Without input from multiple stakeholders, decisions may be made based on limited information or personal biases. Power imbalances often create fertile ground for corruption, as executives with unchecked authority may prioritise personal gain over the organisation's objectives. Within a culture with a higher power imbalance, employees fear speaking out and whistleblowing, and finally, innovation and collaboration suffer.

- By Dr. Susil Kumara Silva

When the power imbalance is high, there is often little oversight to challenge authoritative decisions. This can lead to reckless decision-making and corruption. Corruption can manifest in various forms, such as bribery, nepotism, and fraudulent financial practices. When corruption becomes endemic, it undermines stakeholder confidence and can trigger legal and regulatory repercussions.

Too often, these issues are treated at the surface level, with actions taken to manage symptoms rather than addressing the root causes. Consequently, the core problems remain unaddressed, and challenges continue to resurface. This not only erodes stakeholder trust but also leads to corporate failure.

Power imbalances and failure cases

In Sri Lanka, while many instances of corporate mismanagement go unnoticed, several high-profile cases highlight the critical impact of power imbalances. The collapses of Golden Key Credit Card Company, Pramuka Bank, and ETI Finance, alongside the Central Bank bond scam and persistent issues within numerous State-Owned Enterprises (SOEs), often manifest as a combination of mismanagement, lack of accountability, weak risk management, and inadequate transparency. These issues are systemically rooted in underlying power imbalances that allow unchecked authority and discourage responsible governance.