Corporate malfeasance is a white-collar crime committed by a business or corporation by hiding their actual financial figures, which can severely harm the company’s shareholders and the company itself.
This type of white-collar crime encompasses several types, such as:
- Misappropriation of company assets.
- Fraudulent reporting of the company’s finances.
- An entity attempting to obtain an asset from another via coercion or other illegal means.
- Using private information relating to the markets (such as stocks) for buying or selling purposes.
This type of crime is more common than thought and can cause tremendous damage to the company, its shareholders and anyone who holds a stake in the company. Companies should ensure that fraud prevention training is part of their internal processes.
How corporate malfeasance hurts investors
The driving force behind these types of crimes is usually corporate greed, specifically from those at the highest levels. These individuals stand to gain more than they would if they conducted themselves lawfully if they can get away with corporate misconduct. However, it can have a substantially damaging effect on the company and those who have invested in it, including financial losses, a decline in stock value and a loss of public trust.
What investors can do to protect themselves
- Make sure you thoroughly read and understand the content before signing your name on any investment contracts.
- Beware of opportunities that sound “too good to be true.” If something sounds too good to be true, it usually is. Seek experts who can assist you in evaluating the opportunity.
- Look at whether the company is always on an upward trend. All companies have their ups and downs; it is highly unusual for a company to always meet or exceed expectations.
Corporate malfeasance is something for all investors and stockholders to keep in mind. It is also important to remember to trust your gut. If things feel wrong, you may want to look into it further.