Corporate governance importance, good governance and bad governance, scams, indian scams,Harshad Mehta Scam

1. Corporate Governance
Concerned with holding the balance between economic and
social goals and between individual and communal goals.
Encourage the efficient use of resources and equally to
require accountability for the stewardship of those
resources.
The aim is to align as nearly as possible the
interests of individuals, corporations and society

2. What is Corporate Governance?
Contd…
The primary purpose of corporate
leadership is to create wealth legally
and ethically
This translates to bringing a high level of
satisfaction to five constituencies --
customers, employees, investors, vendors
and the society-at-large
The raison d'être of every corporate body is to ensure predictability, sustainability
and profitability of revenues year after year.

3. Constituents of CG
The Management
To act on the direction of the BOD Implement & Monitor control Systems
Shareholders & Stakeholders
To participate in appointment of Directors To Hold the BOD through proper disclosures
The Board Of Directors
Pivotal Role Directs Management

4. Business Ethics & Corp Gov.
Discipline that examines good or bad
practices within the context of a moral duty.
Business ethics include practices and
behaviors that are good or bad.
Moral conduct is behavior that is right or
wrong.

5. Ethical
Issues
Company-
Shareholder
Relations
Company-
Community
Employee-
Employer
Relations Employee-
Employee
Relations
Company-
Customer
Relations

6. Organization with good ethical practices

7. CAPITAL MARKET SCAMS

8. INTRODUCTION TO
“BIG BULL OF THE TRADING FLOOR”
• HARSHAD MEHTA
• THE GREAT INDIAN SCAM -1992

9. WHO WAS HARSHAD MEHTA ?
STARTED HIS CAREER WITH NEW INDIA
ASSURANCE COMPANY
QUIT HIS JOB IN 1981 TO BECOME A SUB-
BROKER
WENT BANKRUPT IN 1982 AND
RECOVERED SOON TO BECOME
MORE STRONGER
HE WANTED TO BECOME THE MOST SUCCESSFUL
BROKER- THERE BY HE EARNED THE NAME OF
“THE BIG BULL”

10. WHAT WAS THE SCAM ABOUT?
DIVERSION OF FUNDS
USE OF READY FORWORD (RF) TO MAINTAIN
SLR (STATUTORY LIQUIDITY RATIO)
CREATIVE ACCOUNTING
INTRA-DAY TRADING

11. HOW IT WAS DONE AND THE ROLE OF BROKER ?
• MEHTA SOON MASTERD THE TRICKS OF TRADE BY MANAGERING
SEVERAL BROKERS AND SET OUT ON DANGEROUS GAME PLAN
• MEHTA TAKES OFF THE HUGE MONEY FROM SEVERAL BANKS AND
MILLION OF INVESTORS WERE CONEDIN THE PROCESS.
• HIS SCAM WAS EXPPOSED AND THE MARKET CRASHED.

12. EXPLOITING THE LOOP HOLE IN THE BANKING SYSTEM
• HE TRIGGERED THE RISE IN BOMBAY STOCK EXCHANGE IN THE YEAR 1992 BY TRADING
IN SHARES AT PREMIUM ACROSS MANY SEGMENTS
• TAKING ADVANTAGES OF LOOPHOLES IN THE BANKING SYSTEM, HARSHAD AND HIS
ASSOCIATES TRIGGERED A SECURITIES SCAM DIVERTING FUNDS TO THE TUNE OF RS
4000 CRORES FROM THE BANKS TO STOCK HOLDERS BETWEEN APRIL 1991 TO MAY 1992
• HE WAS ARRESTED AND BANED FOR LIFE FROM TRADING IN THE STOCK MARKETS
• MAJOR CULPRITS WERE BROKERS, BANKERS AND FINANCIAL INSTUTIONS.
• HE WAS CHARGED WITH 72 CRIMINAL OFFENCES. A SPECIAL COURT ALSO SENTENCED
SUDHIR MEHTA, HARSHAD’S BROTHER, 6 OTHERS, INCLUDING FOUR BANK OFFICIALS.
• THEY GOT RIGROUS INPRISONMENT FROM 1 YEAR TO 10 YEARS ON A CHARGE OF
DUPING STATE BNK OF INDIA TO THE TUNE OF RS 600 CRORES IN CONNECTION WITH
THE SECURITES SCAM THAN ROCKED THE FINANCIAL MARKETS IN 1992.

14. HIS FAVORITE STOCKS INCLUDED
• ACC
• APOLLO TYRES
• RELIANCE
• TATA IRON AND STEEL CO. (TISCO)
• BPL
• STERILITE
• VIDEOCON

15. THANK YOU!
By,
Sanket Bhawarkar
Mustahid Ali