Historically attention was paid to the subject following the collapse of Savings and Loan companies in USA in the mid 1980’s and the SEC of USA taking a tough stand on the same.  It is ironical that once again it was the US which brought in Sarbanes Oxley Act and along with it very stringent measures of Corporate Governance.  In passing, we may add that there is no corresponding legislation in India. Later, Adrian Cadbury report was an important milestone, which spelt out 19 best practices called the “Code of Best Practices”, which the companies listed on the London Stock Exchange, began to comply with. Some of those guidelines applicable to the Directors, Non-executive Directors, Executive Directors, and others responsible for reporting and control are as follows; Relating to the Directors the recommendations are: The Board should meet regularly, retain full and effective control over the company and Continue reading
Business Ethics
Case Study on Corporate Governance: Satyam Scam
Satyam Computers services limited was a consulting and an Information Technology (IT) services company founded by Mr. Ramalingam Raju in 1988. It was India’s fourth largest company in India’s IT industry, offering a variety of IT services to many types of businesses. Its’ networks spanned from 46 countries, across 6 continents and employing over 20,000 IT professionals. On 7th January 2009, Satyam scandal was publicly announced & Mr. Ramalingam confessed and notified SEBI of having falsified the account. Raju confessed that Satyam’s balance sheet of 30 September 2008 contained: Inflated figures for cash and bank balances of Rs 5,040 crores (US$ 1.04 billion) [as against Rs 5,361 crores (US$ 1.1 billion) reflected in the books]. An accrued interest of Rs. 376 crores (US$ 77.46 million) which was non-existent. An understated liability of Rs. 1,230 crores (US$ 253.38 million) on account of funds which were arranged by himself. An overstated debtors’ Continue reading
Case Study on Corporate Governance: WorldCom Scandal
Established in 1988, WorldCom was formed so that the strongest, most capable public relations firms could serve national and international clients, while retaining flexibility and client- service focus inherent in independent agencies. Through WorldCom, clients have on demand access to in-depth communication expertise from professionals who understand the language, culture and customs in the geographic areas of operation. WorldCom has 105 offices in 90 cities and 40 countries on five continents, more than 2000 employees and recorded revenue of US $ 243.5 million in 2008. In the 90’s WorldCom was involved in acquisitions and purchased over 60 firms. The complete financial integration of the acquired company must be accomplished, including an accounting of assets, debts, and a host of other financially important factors. WorldCom moved into Internet Traffic, controlling 50% of US Internet Traffic and 50% of the e-mails worldwide. In 1997, WorldCom and MCI completed a US $37 billion Continue reading
Case Study on Corporate Governance: Enron Scam
Enron is an energy-based company in Houston, Texas that deals with the energy trade on international and domestic based. Enron Corp. Is one of the world’s largest energy, commodities and Services Company was created out of merger of two major gas pipe line in 1985. Enron was created by merge between Houston Natural Gas and Internorth. Houston’s gas’s CEO Kenneth lay headed the merger of the two companies. After that Kenneth lay become the CEO of Enron. Earlier Enron was Enron was solely involved with the distribution and transmission of electricity and gas of United States. In merger, Enron incurred a large amount of debt, and which resulted deregulation, after this Enron was no longer had the rights of its pipelines. The company had to find a way to generate profits and cash flow. Kenneth lay hired Jeffrey Skilling to work for Enron as an accountant. Skilling suggested the practice Continue reading
Historical Perspective of Corporate Governance
The seeds of modern corporate governance were probably sown by the Watergate scandal in the United States.  The global movement for better corporate governance progressed in fits and starts from the mid-1980s up to 1997.  There were the odd country-level initiatives such as the Cadbury Committee Report in the United Kingdom (1992) or the recommendations of the National Association of Corporate Directors of the US (1995).  It would be fair to say, however, that such initiatives were few and far between.  And while there were the occasional international conferences on the desirability of good corporate governance, most companies — both global and Indian knew little of what the phrase meant, and cared even less for its implications.  More recently, the first major stimulus for corporate governance reforms came after the South-East and East Asian crisis of 1997-98.  This was no classical Latin American debt Continue reading
Definitions of Corporate Governance
The concept of corporate governance is poorly defined because it covers various economics aspects.  As a result of this different people have come up with different definitions on corporate governance. It is hard to point on any one definition as the ultimate definition on corporate governance.  So the best way to define the concept is to provide a list of the definitions given by some noteworthy people. Various Definitions of Corporate Governance 1. According to Sir Adrian Cadbury “The system by which companies are directed and controlled Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society” 2. According Continue reading