For too long, Indian corporate’s has insulated themselves from wholesome developments evolving elsewhere. A closed economy, a sheltered market, limited need and access to global business/trade, lack of competitive spirit and a regulatory framework are some of its reasons. Considering this statement explain corporate misconduct or misgovernance and highlight areas where it stretches beyond malpractices in accounting?
Answers
Indian corporate’s has insulated themselves from wholesome developments evolving elsewhere.
Explanation:
Misconduct and misgovernance refers to the frauds that are commited by the companies to erode shareholder value.
1. No proper Organisational structure: It is true that 'corporate governance' does not have a particular framework or nature and is generally regarded as undefined. There is also a lack of understanding of the numerous problems, such as the consistency and pace of financial and managerial disclosure, compliance with the Code of Good Practice, the functions and obligations of the Board of Directors, the rights of shareholders, etc.
2. Insider trading: Corporate insiders such as managers, directors and employees, by virtue of their position, have access to sensitive corporate information and can misappropriate these information in order to reap income. Such corporate insiders use this information in such a way as to maximize gains or prevent losses on the stock market, to the detriment of the source of the information and to the ordinary investors who purchase or sell their shares without the benefit of "inside" knowledge.
The Satyam scam by Ramalingam Raju- The lack in corporate governance and fraudulent accounts is a lack of both the management and the auditors. The proponents agreed to inflate Satyam's sales and income estimates. In the case that the company has a significant hole in the balance sheet, consisting of non-existent assets and cash reserves that have been reported and unrecorded liabilities.