LEGAL ASPECTS OF Submitted by :

Group 6
BUSINESS Rajat Gupta 168/2018
Meghna Singh 169/2018
Prachi Malhotra 170/2018
CULTURE AND INSTITUITION MATTERS Aakash Parmar 171/2018
IN CORPORATE GOVERNANCE Sweta Hansaria 172/2018
Jatin Bajwa 203/2018
 CORPORATE GOVERNANCE

 Is the set of processes, customs, policies, laws, and institutions affecting the way a
corporation (or company) is directed, administered or controlled.
 It also includes the relationships among the many stakeholders involved and the goals
for which the corporation is governed.
 It is based on principles such as conducting the business with all integrity and fairness,
being transparent with regard to all transactions, making all the necessary disclosures
and decisions, complying with all the laws of the land, accountability and responsibility
towards the stakeholders and commitment to conducting business in an ethical
manner.
PILLARS OF EFFECTIVE CORPORATE
GOVERNANCE
 Transparency
 Accountability
 Disclosure
 Equity
 Fairness
 Rule of Law
 Participatory
 CULTURE CORPORATE GOVERNANCE

 Culture can be described as the set of beliefs, hopes and values that individuals hold
in common, thus, it can be viewed variously as- national cultures, regional cultures,
the culture of a company, and the culture in a board room.
 Griffin, Guedhami, Kwok, Li and Shao (2017) found out that the national cultural
dimension of individualism is positively associated with accountability and
transparent disclosure, and with corporate behaviour standards, and that uncertainty
avoidance is negatively associated with accountability and transparent disclosure,
and with minority shareholder protection.
 Also, application of the corporate governance mechanisms cannot be uniform from
one nation to another, hence, the need to associate corporate governance
mechanisms with Culture.
CULTURE IN INDIA

 People in India and other emerging markets, for example, place great importance
on respect for elders and their views. But, as a minority shareholder, we need to
ensure that this cultural norm does not keep board directors from challenging one
another’s opinions, exposing problems, or vigilantly protecting shareholders’
rights and interests.
 In dealing with another local norm—deference to individuals related to the
families that own businesses , family members are likely to be promoted to
leadership positions over nonfamily employees. The commitment, loyalty,
stability, and pride of family members are valuable traits for effective leadership,
and, as managers, family members tend to have long-term relationships with
stakeholders, including capital providers.
 ENRON CASE

 Firstly, Enron’s Board of Directors failed to fulfil its fiduciary duties towards
the corporation’s shareholders.
 Secondly, the top executives of Enron were greedy and acted in their own
self-interest.
 Thirdly, many of Enron’s employees witnessed the wrongdoings of Enron’s
top executives, and quite a few whistle-blowers came forward.
 Lastly, Enron outsourced external auditing for its internal audit function
instead of establishing a functionally internal audit mechanism and its
external auditor acquiesced in the application of questionable accounting and
fraudulent financial reporting.
 SATYAM CASE
 The culture at Satyam, especially dominated by the board, symbolized an unethical culture.
Mr. raju (Former chairman and CEO ) was responsible for maintaining complete details of
satyam’s accounts since 2002. He himself handed over the bank statements to accountants
and auditors.
 It helped him to manipulate the books of account. The concentration of power in the hands
of Ramalinga Raju helped him to overstate his assets and show fictitious assets.
 On January 7, 2009, he disclosed in a letter to the Board of Directors that he had been
manipulating the company’s accounting numbers for years which are estimated to range
from 2003-08.
 Mr. Raju claimed that he overstated assets on Satyam’s balance sheet by $1.47 billion.
 This was done to make it appear to be a far bigger enterprise than it was. They also sewed
up deals with fictitious clients and introduced over 7,000 fake invoices to record sales that
simply didn’t exist.
 Satyam was reporting sales of over 5200 crores in 2008-09, when it was making about 4100
crores.
CORPORATE GOVERNANCE FRAMEWORK IN
INDIA

 The Companies Acts 2013

 SEBI (Securities and Exchange Board of India) Guidelines
 Accounting Standards issued by the ICAI Standard Listing Agreement of Stock
 Secretarial Standards Issued by the ICSI
 THE SAHARA SCHEME

 Two Sahara group companies which were privately held had taken advantage of a loophole in
the Indian legal system and issued instruments to more than 50 people disregarding the fact
that issue made to more than 50 people will be considered as a public issue, an activity which a
private company is not permitted to indulge in.
 SEBI had passed several orders, interim and final, Sahara moved from pillar to post, indulged in
forum hopping, appealed to several High Courts, the Securities Appellate Tribunal and the
Supreme Court.
 Subsequently, the Supreme Court took a stern view of the matter, as a consequence of which,
Sahara Shree found himself behind bars. The Sahara matter, especially the way SEBI
proactively and decisively took on the challenge, is laudable.
 SATYAM CASE

 Sebi imposed a two-year ban on entities/ firms practicing as chartered accountants in

India under the brand and banner of PwC from directly or indirectly issuing any
certificate of audit of listed companies, compliance of obligations of listed companies
and intermediaries registered with the regulator.
 The capital market regulator confirmed the published books of account of Satyam
contained false and inflated current account bank balances, fixed deposit balances,
fictitious interest income revenue from sales and debtors' figures, and for several
years.
 Price Waterhouse Bangalore and its two erstwhile partners - S Gopalakrishnan and
Srinivas Talluri Noticee - had been asked to jointly disgorge the wrongful gains of over
Rs 13 crore with interest calculated at the rate of 12% per annum from January 7, 2009,
till the date of payment.
CONCLUSION