Corporate Governance Exam Paper

Only available on StudyMode
  • Download(s) : 88
  • Published : March 25, 2013
Open Document
Text Preview
Games Directors play
While analysing the Reality of Boardroom we say many games and tactics often employed by directors so that they don’t lose power. Some such games were alliance, coalition, lobbying, scaremongering, log rolling etc. Here also majority of BOD were near and dear ones of Bright so everybody chose to stay quiet about what is going on. Under-reserving

Like we say in the HLL case under-reserving is a tactic used by firms but in the long run it cant stop companies from collapsing. Role of independent directors
The question Are independent directors really independent has been topic of debate for ages. In the case the role played by independent directors is insignificant. Also it is questionable whether independent directors were present and in the number advised by law or not. Audit Committee

The case talks about KPMG and the arguable role it played but what about the audit committee, was it existent, if so how was it functioning. Its composition and leadership needs attention. Manipulation

Most of the cases of accounting frauds, falsifying records, deceiving shareholders and bankruptcy rest upon the manipulation of the balance sheet and the tactics used to fudge the data. Ex: Enron The company needs to take inspiration from firms like GSK, Infy, and tata which serve as examples of good CG. GSK

* Chairman of board is independent director along with 5 others in in board. Transparency is valued Infosys
* Creating wealth legally and ethically
Tata
* One of the giants and still fascinating governance
* In sync with the values
* Very elaborate code of conduct

Board composition and structure
One of the major flaw ways in the board structure is everyone was quiet about the rising storm dominated by power and status of Bright. There should be some independent directors with ability to question the acts and deeds and the following structures are recommended. European Two Tier model

Shareholders Supervisory board Executive board Management Employees and staff The supervisory board overlooks functions of executive board and can question and alter the function This model is preferred over unitary board.

Chinese model
Here we see the presence of the state as a whole also takes society into account along with shareholders

Board Leadership
One of the major causes of the downfall was the role played by Bright. He was forceful and rigid and thus not a true leader. The features desired for a leader are: Integrity
The ability to differentiate between right and wrong and govern in a manner that it is morally correct and sustainable Independence
The board was like a dummy/puppet with no or very less degree of independence Intellect
The creativity must not come out in form of manipulation and fraud but the betterment of the firm Character
He must be ethical and strong character
Personality
A leader must be flexible and open to new ideas and suggestions. The personality is the holistic perspective. Communication skills, good listener, motivator etc. Board level information
Desired CG was not in place and there was no clear information pathway. The board did not check or authenticate the actions. Control systems
The case clearly shows violation of many acts and laws. The board was not conforming to the supervisory work. The control system was not in place. Auditors at fault:
In cases like Enron and worldcom it has been seen that the external auditors are able to flee away leaving the company in distress. Usually there are tie ups between management and auditors, some internal settlement that leads to such actions. Role of internal audit committee is arguable. The company should have gone to auditors like Delloitte who are reliable and tested. Risks that should be considered – Financial risk. Operational, compliance, Business Four aspects of CG

Internal control, risk management, behavioural governance, independence Sarbax – oxley act
This is one of the landmark acts that came in...
tracking img