Corporate governance and scams in

India

Group member

• Pravesh

• Vijay

• Bharti

• Komal

• Himanshu• Srikant

Types of scam

Internet scam

Banking scam

Telecom scam

Corporate scam

What is corporate governance ?

Major Reasons of Corporate Frauds in India

Weak Financial Control leads to poor performance.

Poor Performance Companies as due to poor compensation don’t have qualified internal audit department, internal control and checks.

Poor Performance Companies are Defaulters of banks/ financial institution.

Profit making company absorbs debts, loans and advances, fixed assets and investments to achieve tax planning.

Additional disclosures in financial statements reduces or prevent fraud.

Proper and complete disclosures give complete picture of any financial irregularity.

Mergers and Amalgamations provide an opportunity to commit fraud

Major Corporate Scams after existence of SEBITotal amount involved in corporate frauds- Rs. 50,414 Crore

1 2345678 91011

Harshad Mehta securities scamPreferential allotment scamCobbler scamVirender Rastogi scamJVG scamKetan Parekh securities scamIPO-Demat scamSatyam scamSaradha scamReebok Shoes Company scamNational Spot Exchange Limited scam

5,000 5,000 2,880 43 1,000 1,250 14610,000 4000 8700 5600

19921995199519961998200120052008201320132013

YEARNO Name of the Scam AMT

Harshad Mehta securities scam

Introduction

History

cost

Impact on others

Regulatory action taken against Mehta

Reebok Shoes Company scam

Introduction

History

cost

Impact of scam

Reebok sales declined 26 per cent on a currency-neutral basis

Reebok brand’s revenue in the quarter 2011-2012 was at 336 million euro as against 427 million euro in the year- 2010-2011.

Satyam scam

INTRODUCTION

SATYAM COMPUTER SERVICE LIMITED

Founded in 1987 by MR.B RAMALINGA

The company offers consulting and information technology services

The company was listed with New York stock exchange national stock exchange Bombay stock exchange

HISTORY

Who is B.Ramlinga raju ?

Career of B.Ramlinga raju

Awards

People behind satyam scam Ramalinga raju :satyam former chairman

B Rama raju: Brother of Ramalinga raju

V srinivas :Ex-chief financial officer

S gopalakrishna :price Waterhouse auditor Talluri srinivas :price Waterhouse auditor

Reason for satyam scam

He was blamed that he was using the funds of the investors for the family business

 Raju wanted to take over his MAYTAS INFRA and MAYTAS PROPERTIES(Company of his sons)

World bank had banned the satyam to take any services for 8 years (due to illegal profit and lack of essential document).

What crime he has constituted ?

1) Raju and his brother, B Rama Raju, were arrested by the Andhra Pradesh police on charges of breach of trust, conspiracy, cheating, falsification of records

2) Raju has mislead various investors.

3) Raju had also used dummy accounts to trade in Satyams shares

4) He has violated the insider trading norm.

5) Funds from Satyam were diverted to Maytas

6) On 22 January 2009, CID told in court that the actual number of employees is only 40,000 and not 53,000 as reported earlier and that Mr Raju had been allegedly withdrawing INR 20 corer rupees every month for paying these 13,000 non-existent employees.

IMPACT OF SCAM

Stock Market Employees Indian economy

Stake-holders Share-holders

More scandals like Satyam can be avoided if:

If auditing firm is honest.

SEBI plays an active role.

Periodic review of legal compliance reports by independent directors