Professional Documents
Culture Documents
Corporate Governance
By,
Kaushal Mandalia
kaushal@insightHR.co.in
Learning Objective
To gain experiential perspective of the emerging
concepts of Corporate Governance
To know recent happening In Indian Corporate
Sector.
Few Practical Examples
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Market Share
Profit
Market Cap
Expansion, Growth
Integrity
Honesty
Transparency
Ethics, Values
Corporate Governance
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Other Statistics
The
Quality
Corpor
ate
Govern
ance
Sustain
able
Growth
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Low Level
of
Corporate
Governance
Unethical
Practices
Resulting in
High Risk
Business
High Level
of GREED
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Case of Satyam
T he biggest corporate scam in India has come from one of the most
respected businessmen. Satyam founder Byrraju Ramalinga Raju
resigned as its chairman after admitting to cooking up the account
books.
His efforts to fill the "fictitious assets with real ones" through Maytas
acquisition failed, after which he decided to confess the crime.
A fraud involving about Rs 8,000 crore (Rs 80 billion),
Following the confession, India's fourth largest IT company lost a
staggering Rs 10,000 crore (Rs 100 billion) in market capitalisation as
investors reacted sharply and dumped shares, pushing down the scrip
by 78 per cent to Rs 39.95 on the Bombay Stock Exchange. US.
The Confession
"I am now prepared to subject myself to the laws of the land and face
consequences thereof," Raju said in a letter to SEBI and the Board of
Directors, while giving details of how the profits were inflated over the
years and his failed attempts to "fill the fictitious assets with real ones.
Raju said the company's balance sheet as of September 30 carries
"inflated (non-existent) cash and bank balances of Rs 5,040 crore (Rs
50.40 billion) as against Rs 5,361 crore (Rs 53.61 billion) reflected in the
books."
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Big Scam
Harshad Mehta worked with the New India Assurance Company before
he moved ahead to try his luck in the stock markets.
Mehta soon mastered the tricks of the trade and set out on dangerous
game plan. Mehta has siphoned off huge sums of money from several
banks and millions of investors were conned in the process.
His scam was exposed, the markets crashed and he was arrested and
banned for life from trading in the stock markets
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Big Scam
He was later charged with 72 criminal offences. A Special Court also
sentenced Sudhir Mehta, Harshad Mehta's brother, and six others,
including four bank officials, to rigorous imprisonment (RI) ranging from
1 year to 10 years on the charge of duping State Bank of India to the
tune of Rs 600 crore (Rs 6 billion) in connection with the securities scam
that rocked the financial markets in 1992. He died in 2002 with many
litigations still pending against him.
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C R Bhansali Scam
C R Bhansali Scam
The Bhansali scam resulted in a loss of over Rs 1,200 crore (Rs 12 billion).
He first launched the finance company CRB Capital Markets, followed by
CRB Mutual Fund and CRB Share Custodial Services. He ruled like a
financial wizard 1992 to 1996 collecting money from the public through
fixed deposits, bonds and debentures. The money was transferred to
companies that never existed
.
CRB Capital Markets raised a whopping Rs 176 crore in three years. In
1994 CRB Mutual Funds raised Rs 230 crore and Rs 180 crore came via
fixed deposits. Bhansali also succeeded to to raise about Rs 900 crore
from the markets.
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C R Bhansali Scam
However, his good days did not last long, after 1995 he received
several jolts. Bhansali tried borrowing more money from the
market. This led to a financial crisis.
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UTI Scam
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UTI Scam
Former UTI chairman P S Subramanyam and two executive
directors -- M M Kapur and S K Basu -- and a stockbroker Rakesh G
Mehta, were arrested in connection with the 'UTI scam'.
UTI Scam
Subramanyam, Kapur and Basu had changed their stance on an
investment advice of the equities research cell of UTI. The
promoter of Cyberspace Infosys, Arvind Johari was arrested in
connection with the case. The officals were paid Rs 50 lakh (Rs 5
million) by Cyberspace to promote its shares.
He also received Rs 1.18 crore (Rs 11.8 million) from the company
through a circuitous route for possible rigging the Cyberspace
counter.
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Home Trade
Home Trade
Home Trade had created waves with celebrity endorsements. But
Sanjay Agarwal's finance portal was just a veil to cover up his
shady deals. He swindled a whopping Rs 600 crore (Rs 6 billion)
from more than 25 cooperative banks.
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Home Trade
Co-operative banks and brokers acted in collusion in abid to make
easy money at the cost of the hard earned savings of millions of
Indians. In this case, even the Public Provident Fund (PPF) was
affected.
A sum of about Rs 92 crore (Rs 920 million) was missing from the
Seamen's Provident Fund. Sanjay Agarwal, Ketan Sheth (a broker),
Nandkishore Trivedi and Baluchan Rai (a Hong Kong-based NonResident Indian) were behind the Home Trade scam.
Home Trade
Gilt funds, as they are conveniently called, are mutual fund schemes
floated by asset management companies with exclusive investments in
government securities.
The schemes are also referred to as mutual funds dedicated exclusively
to investments in government securities. Government securities mean and
include central government dated securities, state government securities
and treasury bills.
The gilt funds provide to the investors the safety of investments made in
government securities and better returns than direct investments in these
securities through investing in a variety of government securities yielding
varying rate of returns gilt funds, however, do run the risk.. The first gilt
fund in India was set up in December 1998. .
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Board of Directors
STATUTORY DUTIES
To file return of allotment: Section 75 .
Not to issue irredeemable preference share or shares or share
Board of Directors
To prepare and place at the AGM along with the balance sheet and
profit & loss account a report on the companys affairs including the
report of the Board of Directors (Section 173, 210 & 217).
To authenticate and approve annual financial statement (Section
215).
To appoint first auditor of the company (Section 224).
To appoint cost auditor of the company (Section 233B).
To make a declaration of solvency in the case of Members voluntary
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Board of Directors
1. Duty of good faith
2. Duty of Care
3. Duty Not to Delegate
GENERAL DUTIES
LIABILITIES
A. Liabilities to the Company
Breach of fiduciary duty
Negligence
Mala fide Acts
Board of Directors
1. Liabilities to third parties
1. Liabilities under Companies Act
1. Prospectus
2. With regard to allotment
3. Unlimited Liability
4. Fraudulent Trading
2. Liability for breach of Statutory Duties
3. Liability for acts of co-directors
4. Criminal Liability
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Corporate Governance
CORPORATE GOVERNANCE is the system by which companies are
directed and controlled by the management in the best interest of the
shareholders and others ensuring greater transparency and better and timely
financial reporting. The Board of Directors are responsible for governance of
their companies.
CORPORATE GOVERNANCE is needed to create a corporate culture of
consciousness, transparency and openness. It refers to combination of laws,
rules, regulations, procedures and voluntary practices to enable the companies
to maximize the shareholders long-term value. It should lead to increasing
customer satisfaction, shareholder value and wealth.
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Clause 49
Clause 49 lays down guidelines for composition of the board
including the number and qualities of independent directors,
remuneration of board members, code of conduct, and the
constitution of various committees (including audit),
disclosures, and suggested contents of annual reports.
These changes are aimed at moving Indian companies rapidly
up the evolutionary path towards business processes and
management oversight techniques.
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Business
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L&T
The Company's philosophy on Corporate Governance is built on a
rich legacy of fair and transparent governance and disclosure
practices
Larsen & Toubro (L&T) has been judged as India`s Best Managed
Company by leading business magazine `Business Today` and its
knowledge partner `Ernst & Young` (2008)
The Company had adopted Corporate Governance and disclosure
practices much before these were mandated by legislation.
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Wipro
Wipro has been named amongst The Five Best Companies in
Corporate Governance Practices in Asia/Pacific in 2007 by MZ
Consult
As on March 31, 2009,the Board comprised of 6 Independent
Directors out of a total strength of 10 directors
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Wipro
Corporate Governance philosophy is put into practice in
Wipro through the following four layers, namely
1. Governance by Shareholders
2. Governance by Board of Directors
3. Governance by Sub-committee of Board of Directors
4. Governance of the management process
Wipro
Highlight of Wipros CG TRANSPARENCY
The following are very clearly shared on the web:
Charters of the Committees
Wipro's ombudsprocess for Non employees and Employees
Corporate governance guidelines
Code of ethics for principal & finance officers
Code of business conduct and ethics
NYSE Corporate Governance Report 2009
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While
Training
is only
Showing
the path,
Walking
on to it
should
be your
Choice
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By,
Kaushal Mandalia
kaushal@insightHR.co.in
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