MBA Corporate Governance And Responsibility Essay

wherefore did it book 10 years to bring Harshad Mehta to justice? What weaknesses in the monetary markets allowed such abuse to succeed?Harshad Mehtas scam was one which mingled huge magnitudes, which is why it probably came into light in the first pip.1 Scams of small magnitude be happening almost anyday at the Bombay tired Exchange but not coming to light. There atomic number 18 galore(postnominal) reasons for this. Some of the major reasons are briefly discussed below.The Indian businesses have traditionally being family owned. Owing to c at a timentration of money in a few hands, most bulk have concentrated on survival and aegis due to which the risking loving entrepreneurial skill has not developed more than. beingness family owned businesses, a lot of insider and sensitive information is often functional to the owners and their relatives even though the company is technically a separate reasoned entity. Given this insider information and the relatively weak leg al machinery, it is easy for the insiders to manipulate prices of stocks by large buying or selling.The reason forthlined above also gives rise to the herd mentality i.e. if bulk activity is protruden on a stock on a particular day in a particular re achieve people see to trust it promptly believing that some one with insider and reliable information is acting upon it. This is what helped Harshad Mehta in pulling away the scam. Further, on that point are hardly any checks and balances on the end use of loans given by banks and other financial institutions. They seem to be satisfied by the nature of the borrower and once they are confident(p) that he sack up return the money, the end use of the same whether for system or any other activity is hardly looked into.It took as yen as ten years to bring Harshad Mehta to justice due to the junto of many an(prenominal) systemic failures and adjectival lacuna. Firstly, it is difficult to pin point in such a huge market as to wh ere the first heedlessness or breach of law took place. Further, in that respect are many procedural approvals that must(prenominal) be intromitn before the regulator crowd out ready any concrete carry out. The countrys civil procedure offset is quite slow too, with many appeals available before an offender is in conclusion convicted. Therefore, even high profile racing shells such as these often take several years before finally being disposed off.How freighter ethics in the boardroom be monitored and restrainerled?Ethics, in the first place, is a rather complicated and complex issue. There is no straightjacket enactment as different situations would demand different measures. In the boardroom, where money is at stake, and e rattlingone has their own business to mind, it is probably even more difficult. This has been a subject of considerable debate, and there are certain measures which companies should generally apply, with specific variations in accordance with the particular situation at hand. Some of these general principles are briefly discussed below.2 Firstly, there has to be strict avoidance of concentration of chief(prenominal) powers and functions in a few hands. As can be seen from the maxwell Affair of 1991, too many responsibilities in different areas of solicitude are likely to be fatal to the company. Further, the delegation of power must not be absolute. Power corrupts, and absolute power corrupts absolutely. There should be checks and balances veracious upto the confidential information level. At the top most level, where it is difficult to have checks and balances in a vertical hierarchy, the same should be had using a plain structure. Strong ethical base and principles must come in from the top and trickle down to the bottom. It is Copernican that these principles are insisted upon, no matter how corked a situation a company is in. They should be introduced as non-negotiable to every new employee who joins, so that when he climbs the ranks in the corporate ladder, he is every bit insistent about such principles. Gradually, a strong ethical overstep short is built.Is there a open difference mingled with Enrons sendup and Madoffs appeal to selected investors?There is quite a discernible difference between Enrons fraud and Madoffs appeal to elite investors. Enrons fraud was a clear case of lack of zippy auditing and poor accounting practices. The profits were terribly overstated and the accounts were shown to pose a rosy picture of the state of soulal business of the company. The true state of affairs was not revealed to the shareholders and other stakeholders in the company. The auditors were cleverly deceived, and they too didnt do any follow up action.3 Madoffs case is a much more complex one than Enron. Madoffs case has largely been seen as one which could never be expected, and therefore no laws are in place to remedy such a situation. Unlike Enrons case, which can be foreseen, Madoffs case was completely unique and innovative. Enrons case has been foreseen by the law shakers, due to which many laws are in place to keep in check of the same.Firstly, there are accounting standards and conventions which must be adhered to by all companies. Second, all companies are statutorily demand to get their accounts audited so as to doubly ensure that they reflect a true and fair view of the affairs of the company. Although it has been said in a landmark decision, that an auditor is a watchdog and not a bloodhound, it can be said that the auditors failed to do an upto-the mark job in Enron and then the scandal.4 However, in complete contrast, Madoffs case is so unexpected that there are no laws which effectively deal with such a situation. He used his reputation of being an expert at the Wall channel and a continued promise to offer secured and steady returns to swindle many high net worth individuals of millions of dollars. Such an exercise of personal assumption is dif ficult for the law to stop. Now, in retrospect, of course there are laws which dominance certain revealings in case of any broker or person dealing on anothers behalf in the stock market. Further, there are investor awareness and know-your-rights campaigns by the regulator. Thus, another importance difference between the two scandals which essentially flows from the main difference is the solutions that they demand are very different from each other.What steps would you take as an independent managing director on the board of a company where you had reason to believe that ambidextrous or unethical activities were being carried out by the high-profile company attraction?First of all, being an independent director, there is a great follow of responsibility on my shoulder to ensure that such policies are pushed for, which make it near to impossible for fraudulent or unethical activities to be carried out by any individual in the company. However, if this was to happen, there woul d be a series of measures I would attempt to take.Firstly, it would be important to get the firm Board of Directors, or as far as it may be practicable, into confidence so as to ensure that the top level management is not divided on such an important issue. Once this is done, it is important to have an internal conference with the venture offender about his offensive activities. It is important at this stage to consider all possible solutions to the problem, as open action against such a person should be the last resort, given that such information is particularly sensitive, and it would adversely affect the reputation of the company, if it were to get leaked.Therefore, it is also important that only so many people are made aware of such a situation as are required. It is essential that the matter not be lingered, and damage control be the top most priority. Again, every possible option should be explored including plea bargaining and settlement through mediation or negotiation.5 The suspected offender should also be taken into confidence that full disclosure would be in his best interests too. No threat or action should be immediately taken against him, as then he cleverness attempt to conceal the substance of the matter, which would be eventually then take a long time to be fathomed. Any severe action contemplated should be taken only once the issue has been fully resolved.Finally, once the issue has been resolved, there should be a fall back to see why such an event happened, and what can the company do in future to prevent it. The offender should not be let off lightly, as this may go on to set a pretty example. At the same time, the best interests of the company in the long run must be kept in mind.REFERENCESAnonymous, Harshad Mehta A filth to commend f. www.casestudy.co.in (Last Visited 25 July, 2010).Anonymous, Key Biscayne continuative in Madoff Scandal, Key Biscayne Times, 23 July, 2010.Cathy Thomas, Behind the Enron Scandal, TIME Magazine, Jun e 2002.Kevin MacDonald, Is the Madoff Scandal Problematic?, Occidental quarterly Online, July 2010.Stephanie Maier, How global is good corporate governance?, EIRIS Report, Aug 2005.1 Anonymous, Harshad Mehta A Scandal to come back c.f. www.casestudy.co.in (Last Visited 25 July, 2010).2 Stephanie Maier, How global is good corporate governance?, EIRIS Report, Aug 2005.3 Cathy Thomas, Behind the Enron Scandal, TIME Magazine, June 2002.4 Kevin MacDonald, Is the Madoff Scandal Problematic?, Occidental Quarterly Online, July 2010.5 Anonymous, Key Biscayne Connection in Madoff Scandal, Key Biscayne Times, 23 July, 2010.