I.

CORPORATE DISATERS AND ETHICS IN DIFFERENT CORPORATE

SCENARIO

A Corporate Disaster can happen any time and there is an evidence of negligence,
unethical behaviour or third-party interferences which can impact company’s
reputation. This can include the evidence of dodgy business practices, creative
accounting, data breaches or anything that affects the environment.

EXAMPLES OF CORPORATE DISASTER:

1. APPLE SCANDAL:

According to Apple, if older phones place a high demand on the battery, the
battery transmits electrical spikes to the processor. The processor was built to
protect itself from current spikes like this. The processor's reaction is to turn off the
phone in order to protect it and extend its life. As a result, unexpected shutdowns
are typical among older iPhone models.

Apple maintains that the software update was designed to slow down the CPU.
This means the processor will no longer be able to draw a large amount of power
from the battery, and the entire process will be avoided.

As a result, Apple says that its actions were consistent with its values, which
prioritise customer satisfaction. Apple has denied reports that it deliberately slows
down phones to entice customers to upgrade to newer models.

Ethical Issue: Apple's opponents have described this as more of an ethical issue
than a business one. Apple is correct about the phones slowing down. Perhaps it
does safeguard the phone's processor and extend its life. Apple should have ideally
issued users a notification offering them the option to keep their current software
or upgrade to a newer version if they so desired.

Apple does not have the authority to change with its software without the user's
permission once they have purchased the product. As a result, even if Apple
slowed down the iPhone with good intentions, it is still breaching consumers'
privacy.
Apple is tampering with people's phones without their permission! Even if the
intention was to protect the property from a flood, authorization must be obtained
prior to digging in the front yard.

Following the controversy, Apple's stock dropped from 22 to 29 December before

regaining its value in early January 2018.

2. UBER SCANDAL:

In 2017, an engineer for Uber named Susan Fowler wrote a blog post explaining
the culture of misogyny at Uber, how she was sexually assaulted by her supervisor
and how Uber’s corporate culture threatened her to fire if she voice out about the
assault.

After Susan Fowler’s exposing blog post, a video surveillance from an Uber
driver’s car showed how the driver was berated by the Uber CEO Travis Kalanick
for failing fares and led to the resignation of Travis Kalanick. After these crises
many users switched to other transportation apps.

This crisis was caused by the aggressive, competitive, misogynistic company

culture and unfit CEO who was unable to run such a massive company. If Uber’s
company culture discouraged sexual harassment in the work place and had a
system to investigate and handle it then the blog post written by Susan Fowler
would never have been published and not have taken down the sales by $70 billion.

WAYS THROUGH WHICH COMPANIES CAN BE PREPARED FOR THE

DISASTER ARE AS FOLLOWS:

Disasters happens in a sudden and are unpredictable which often leaves a

devastation in their wake. Corporations has an additional social responsibility to
offer both immediate as well as long-term help during and after the disasters.

It is impossible to be prepared for all the disasters but a corporation can have a
blueprint in place to react effectively after the crisis. Allocation of funds quickly to
both the community groups and employee can make a huge difference for those
who are trying to get through the catastrophe and rebuild their lives.

 Determine when to respond:

Corporations need to create guidelines in advance to help themselves decide
when to respond to a disaster. This requires clarity and focus and it is also
emotional as humans seek to help others in need.

It is very difficult to make decisions at the end. Only money cannot help in
reducing the hardship faced during or after the disaster. But when a
corporation has a blueprint it helps them to decide the position of the
organization and clarity in decision-making.
 Have a communication plan:
Employees will be moved to act in the aftermath of a crisis and will seek to
the corporation for assistance.

While developing a strategy takes time, businesses will discover that having
one in place is significantly more efficient than scrambling to develop one
after a calamity strikes.
 Be aware of the proper technology:
Technology is becoming more and more vital in disaster relief efforts.
Employees and their friends might use social media technology like
Facebook Safety Check and Google People Finder to indicate themselves as
safe.
 When it comes to corporate aid, having the right technologies in place to
handle things like crowdfunding, peer-to-peer fundraising, employee match
campaigns, volunteer hours, and other ways for concerned employees to
donate time or money to relief efforts is critical.

Employee participation and the amount of money routed to the impacted

area can both rise with the proper use of technology, but the process must be
documented to really understand the results.
 Set up funds in advance for disaster relief:
Whenever it comes to natural disasters, the saying "hope for the best,
prepare for the worst" still holds true. While we all hope for the best, we
must be prepared for the worse, which includes having funds on hand for
corporations. Typical corporate donation budgets, on the other hand, rarely
provide for one-time catastrophes like natural disasters.

Companies can still help by donating to organisations like the American Red
Cross' Annual Disaster Giving Program. In the event of a crisis, this permits
the American Red Cross to use donations as it sees fit. Collaboration
between corporations and such initiatives and organisations can help to
create a more coordinated recovery effort.
 Plan for long-term relief:
The Centre for Disaster Philanthropy frequently finds that disaster-relief
donations dry up within six months of the occurrence. With the prevailing
trend toward immediate and short-term relief, it is critical for businesses to
plan for long-term assistance. Understand that while organising employee
relief initiatives, cash and resources will need to last for a long time.
 Build connections in communities:
Multiple groups working together can help with both immediate relief and
long-term community healing. Corporations should take advantage of the
opportunity to form ties with reputable local groups such as non-profits,
community foundations, and small enterprises. Building and sustaining
relationships with such groups will be extremely beneficial in the event of a
natural disaster, and it should be done as soon as possible.
 After a crisis, communicating and partnering with these local groups will not
only help reveal the genuine requirements of victims, but it will also make
the distribution of products and services collected by employees much
easier. Parts of disaster-stricken areas may go days without electricity or
phone connection, and knowing where to deliver assistance is critical.

II. STOCK MARKET SCANDALS

The stock market is a marketplace where shares of publicly traded firms can be
bought and sold. The primary market is where corporations raise cash by selling
shares to the general public in an initial public offering (IPO).

Some of the stock market scandals are:

1. The Harshad Mehta Scam (1992):

Harshad Mehta had only Rs.40 in his pocket when he arrived in Mumbai. Soon
after, he discovered his enthusiasm for the stock market and worked as a
stockbroker for a decade until founding his own brokerage firm, 'GrowMore
Research and Asset Management,' in 1984.

Following the liberalization of the Indian economy in 1991, which saw the entry of
foreign businesses and greater competition, the public sector, private sector, and
banks were under tremendous pressure to improve their bottom lines.

The banks, on the other hand, were in a dilemma. They were required to keep a
certain percentage of their assets in government fixed-income securities with the
RBI, known as the statutory liquidity ratio (SLR). They were also barred from
investing in the stock market. Their excess funds were collecting dust in the bank
vaults.

In exchange for interest, these banks opted to lend their extra capital to banks that
were unable to maintain the appropriate SLR. Ready Forward Deals would allow
banks to lend money to one another (RFDs). A secured short-term loan from one
bank to another against collateral, such as government bonds, is known as an RFD.

The banks would simply issue Bank Receipts instead of actually transferring the
bonds and going through the procedures (BR). The actual government securities
were not transferred with Bank Receipts, but the short-term purchasing and selling
rights were.

Harshad Mehta functioned as a go-between for the two banks. The banks would
issue bank receipts in the broker's name, and the broker would then lend the money
to another bank. The lending and borrowing banks were unfamiliar with one other.

Harshad Mehta uncovered a flaw in the system that would propel him to the top of
the Indian stock market. He persuaded banks to issue him checks in his own name
for buying and selling BRs because he had become a well-known figure in the
stock markets by that time.

In a typical RFD transaction, only two banks are involved; however, Harshad
Mehta's RFD transactions included many institutions. In addition, he persuaded
bank personnel to produce fictitious bank receipts with no security. So, in a
nutshell, he raised millions of dollars to fight fraudulent paper receipts.

He cashed the checks and spent the money to boost stock prices. In barely three
months, he raised the stock price of ACC Ltd from Rs 200 to Rs 9,000 per share.
He just sold the stocks at a high price and repaid the principle to the banks
whenever it came time to reimburse the bank. If he was unable to sell his shares, he
would contact the third bank and request that their cash be transferred to the first
bank.

As a result, the stock markets began to rise, creating an optimistic environment.

Even inexperienced retail investors were drawn in and invested their hard-earned
cash. However, because these stock values were artificially inflated without any
underlying development potential, the markets quickly dropped, making it difficult
for Harshad Mehta to sell his shares and repay his creditors.

The stock prices fell once Sucheta Dalal exposed the scam, as expected, due to a
lack of fundamental causes, and Harshad Mehta was no longer able to repay these
RFD loans.

He was sentenced to 9 years in prison after the entire 1992 scheme was exposed.
He allegedly defrauded an Indian bank of Rs.5, 000 crores.
2. The Ketan Parekh Scam:

Ketan Parekh was a trainee under Harshad Mehta and was the mastermind behind
India's second-largest stock market fraud. While Harshad Mehta dealt with bank
receipts, Ketan Parekh conned Indian banks with Pay Orders. To inflate the values
of ten selected stocks, known as the K-10 stocks, he used 'pump and dump' and
'circular trading' tactics.

Companies in the Information, Communication, and Entertainment sector made up

the majority of the K-10 stocks. K-10 equities included Amitabh Bacchan Corp,
Zee, and Penta four Software.

He timed his investments in these stocks to correspond with the DotCom boom of
1997-2001, so that an increase in the stock price of these 10 stocks would not
attract undue attention.

He inflated the stock prices of HFCL and Global Teleservices from Rs.42/share to
Rs.2, 300/share and Rs.85/share to Rs.3, 100/share, respectively. He'd then use his
overvalued stocks as collateral to obtain more debts.

The RBI allowed banks to provide corporations a maximum loan of 15 crores at

the time, but he borrowed 800 crores from the MMCB (Madhavpura Mercantile
Co-op Bank) and Rs.100 crores from the GTB (Global Trust Bank) without any
collateral by bribing bank officials.

Even the K-10 firms' promoters bribed him to raise their stock values. He would
then use this money to raise stock values through circular trading, which is trading
among only a few select operators. This would result in a large amount of free float
in the stock. Because of the abundant liquidity, retail investors were drawn into the
stocks.

However, when the DotCom bubble burst in 2001-2002, the stock values of all K-
10 stocks plummeted. Because the MMCB and GTB banks were on the verge of
going bankrupt, he was unable to sell the stocks or raise any new capital.

The RBI started an investigation into the banks' activities because they were unable
to refund their depositors, which revealed the fraud.
Ketan Parekh, having learned from the best con artist, took all the required
measures, such as timing the investment during the DotCom bubble and trading on
the Calcutta Stock Exchange rather than the BSE, yet he was detected.

He was forbidden from investing in the stock market until 2017. The scandal is
estimated to have cost close to Rs.40, 000 crores. The youngster had definitely
outperformed the teacher.

PLAGIARISM: