Table of Contents

INTRODUCTION .............................................................................2 DEFINITION ....................................................................................4 FEATURES .......................................................................................4 THE CAUSE Society.................................................................5 What was Scam all about ........................................................6 HARSHAD MEHTA : THE SCAMSTER. ......................................6

CORPORATE GOVERNANCE

INTRODUCTION
Corporate Governance is a relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations.Concerned with identifying ways to ensure that strategic decisions are made effectively.Used in corporations to establish order between the firms owners and its top-level managers. Corporate governance involves regulatory and market mechanisms, and the roles and relationships between a companys management, its board, its shareholders and other stakeholders, and the goals for which the corporation is governed.[1][2] Lately, corporate governance has been comprehensively defined as "a system of law and sound approaches by which corporations are directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby mitigating agency risks which may stem from the misdeeds of corporate officers."[3] In contemporary business corporations, the main external stakeholder groups are shareholders, debtholders, trade creditors, suppliers, customers and communities affected by the corporation's activities. Internal stakeholders are the board of directors, executives, and other employees. Much of the contemporary interest in corporate governance is concerned with mitigation of the conflicts of interests between stakeholders.[4] Ways of mitigating or preventing these conflicts of interests include the processes, customs, policies, laws, and institutions which have an impact on the way a company is controlled.[5][6] An important

theme of corporate governance is the nature and extent of accountability of people in the business. A related but separate thread of discussions focuses on the impact of a corporate governance system on economic efficiency, with a strong emphasis on shareholders' welfare.[7][8] In large firms where there is a separation of ownership and management and no controlling shareholder, the principalagent issue arises between uppermanagement (the "agent") which may have very different interests, and by definition considerably more information, than shareholders (the "principals"). The danger arises that rather than overseeing management on behalf of shareholders, the board of directors may become insulated from shareholders and beholden to management.[9] This aspect is particularly present in contemporary public debates and developments in regulatory policy.(see regulation and policy regulation).[1] Economic analysis has resulted in a literature on the subject.[10] One source defines corporate governance as "the set of conditions that shapes the ex post bargaining over the quasi-rents generated by a firm."[11] The firm itself is modelled as a governance structure acting through the mechanisms of contract,[12][8] possibly in tandem with corporate finance.[13] There has been renewed interest in the corporate governance practices of modern corporations, particularly in relation to accountability, since the high-profile collapses of a number of large corporations during 2001-2002, most of which involved accounting fraud. Corporate scandals of various forms have maintained public and political interest in the regulation of corporate governance. In the U.S., these include Enron Corporation and MCI Inc. (formerly

WorldCom). Their demise is associated with the U.S. federal government passing the Sarbanes-Oxley Act in 2002, intending to restore public confidence in corporate governance. Comparable failures in Australia (HIH, One.Tel) are associated with the eventual passage of the CLERP 9 reforms. Similar corporate failures in other countries stimulated increased regulatory interest (e.g., Parmalat in Italy).

DEFINITION
Corporate Governance is about promoting corporate fairness, transparency and accountability. -James. D. Wolfensohn Corporate Governance is holding the balance between economic and social goals and between individual and community goals.-SirAdrian Cadbury Corporate Governance is the system by which businesses are directed and controlled. -Cadbury Report (UK)

FEATURES
Interface between company and shareholder Maximum welfare Voluntary concepts Managerial decision Accountability Transparency Essence

 Responsibilities and duties Ethics, values and morals Set of system

THE CAUSE Society

The 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. With a fraud involving about Rs 8,000 crore (Rs 80 billion), Satyam is heading for more trouble in the days ahead. O n Wednesday, 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. The NYSE-listed firm could also face regulator action in the US. "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."

What was Scam all about

The companys balance sheet was inflated to Rs. 5,361 Cr at the end of September 2008 against the actual Rs 5,040 Cr. There is an artificial cash balance of Rs.588 Cr in September 2008. Rs.1,230 Cr was arranged to Satyam, which is not reflected in its books, to keep Satyam's operations running. Raju also admitted that Satyam's profits were inflated over several years.

How it was caught ?

Satyam Computers had on December 16, 2008, announced that it will acquire two group firms Maytas properties and Maytas Infra for $1.6 billion (about Rs 8,000 cr) as part of its diversification strategy , this created a alleged violation of corporate governance laws.

HARSHAD MEHTA : THE SCAMSTER.

H e was known as the 'Big Bull'. However, his bull run did not last too long. He triggered a rise in the Bombay Stock Exchange in the year 1992 by trading in shares at a premium across many segments.

 Taking advantages of the loopholes in the banking system, Harshad and his associates triggered a securities scam diverting funds to the tune of Rs 4000 crore (Rs 40 billion) from the banks to stockbrokers between April 1991 to May 1992. 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. 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.

BIBLOGRAPHY

1. Corporate Governance: Cases and Materials (2012) J. Robert Brown, Jr., Professor of Law, University of Denver Sturm College of Law; Notre Dame Law School 2. www.wikipedia.com