Corporate Governance
Concerned with holding the balance between economic and social goals and between individual and communal goals.
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
What is Corporate Governance? Contd…
The primary purpose of corporate leadership is to create wealth legally and ethically
This translates to bringing a high level of satisfaction to five constituencies -- customers, employees, investors, vendors and the society-at-large
The raison d'être of every corporate body is to ensure predictability, sustainability and profitability of revenues year after year.
Constituents of CG
Business Ethics & Corp Gov.
Discipline that examines good or bad practices within the context of a moral duty.
Business ethics include practices and behaviors that are good or bad.
Moral conduct is behavior that is right or wrong.
Ethical Issues
Company-Shareholder Relations
Company-Community
Employee-Employer RelationsEmployee-Employee
Relations
Company-Customer Relations
Organization with good ethical practices
CAPITAL MARKET SCAMS
INTRODUCTION TO “BIG BULL OF THE TRADING FLOOR”• HARSHAD MEHTA• THE GREAT INDIAN SCAM -1992
WHO WAS HARSHAD MEHTA ?
STARTED HIS CAREER WITH NEW INDIA ASSURANCE COMPANY
QUIT HIS JOB IN 1981 TO BECOME A SUB-BROKER
WENT BANKRUPT IN 1982 AND RECOVERED SOON TO BECOME MORE STRONGER
HE WANTED TO BECOME THE MOST SUCCESSFUL BROKER- THERE BY HE EARNED THE NAME OF “THE BIG BULL”
WHAT WAS THE SCAM ABOUT?
DIVERSION OF FUNDS
USE OF READY FORWORD (RF) TO MAINTAIN SLR (STATUTORY LIQUIDITY RATIO)
CREATIVE ACCOUNTING
INTRA-DAY TRADING
HOW IT WAS DONE AND THE ROLE OF BROKER ?
• MEHTA SOON MASTERD THE TRICKS OF TRADE BY MANAGERING SEVERAL BROKERS AND SET OUT ON DANGEROUS GAME PLAN
• MEHTA TAKES OFF THE HUGE MONEY FROM SEVERAL BANKS AND MILLION OF INVESTORS WERE CONEDIN THE PROCESS.
• HIS SCAM WAS EXPPOSED AND THE MARKET CRASHED.
EXPLOITING THE LOOP HOLE IN THE BANKING SYSTEM
• HE TRIGGERED THE RISE IN BOMBAY STOCK EXCHANGE IN THE YEAR 1992 BY TRADING IN SHARES AT PREMIUM ACROSS MANY SEGMENTS• TAKING ADVANTAGES OF LOOPHOLES IN THE BANKING SYSTEM, HARSHAD AND HIS
ASSOCIATES TRIGGERED A SECURITIES SCAM DIVERTING FUNDS TO THE TUNE OF RS 4000 CRORES FROM THE BANKS TO STOCK HOLDERS BETWEEN APRIL 1991 TO MAY 1992• HE WAS ARRESTED AND BANED FOR LIFE FROM TRADING IN THE STOCK MARKETS• MAJOR CULPRITS WERE BROKERS, BANKERS AND FINANCIAL INSTUTIONS.• HE WAS CHARGED WITH 72 CRIMINAL OFFENCES. A SPECIAL COURT ALSO SENTENCED
SUDHIR MEHTA, HARSHAD’S BROTHER, 6 OTHERS, INCLUDING FOUR BANK OFFICIALS. • THEY GOT RIGROUS INPRISONMENT FROM 1 YEAR TO 10 YEARS ON A CHARGE OF
DUPING STATE BNK OF INDIA TO THE TUNE OF RS 600 CRORES IN CONNECTION WITH THE SECURITES SCAM THAN ROCKED THE FINANCIAL MARKETS IN 1992.
HIS FAVORITE STOCKS INCLUDED
• ACC• APOLLO TYRES• RELIANCE• TATA IRON AND STEEL CO. (TISCO)• BPL• STERILITE• VIDEOCON
THANK YOU!
By,Sanket BhawarkarMustahid Ali