Corporate Governance Rule and Regulations

in India beside Some Cases of Corporate

Governance Failures in India and Else Where

Corporate Governance Rule and

Regulation

 Companies Act, 2013: This is the primary legislation governing companies

in India, and it includes provisions related to corporate governance, such
as requirements for independent directors, board committees, and
related-party transactions.

 Securities and Exchange Board of India (SEBI) Listing Regulations: SEBI is

the regulator for securities markets in India, and it has issued regulations
related to corporate governance for listed companies, such as
requirements for board composition, disclosure norms, and stakeholder
engagement.

 Ministry of Corporate Affairs (MCA) Guidelines: The MCA issues guidelines

on corporate governance, such as the National Voluntary Guidelines on
Social, Environmental and Economic Responsibilities of Business, which
provides guidance on sustainable and responsible business practices.

 Insider trading: In India, the SEBI regulations prohibit insider trading,

which refers to trading in securities based on confidential information not
available to the public. The regulations require companies to establish a
code of conduct for prevention of insider trading and to disclose details of
such trades to the public. Failure to comply with these regulations can
result in significant fines and penalties.
 Related-party transactions: The Companies Act, 2013 requires companies
to disclose related-party transactions, which refer to transactions between
a company and its related parties such as directors, key managerial
personnel, and their relatives. The Act requires approval of the board of
directors and shareholders for such transactions, and failure to comply
with these requirements can lead to legal and reputational risks for
companies.

Case in Corporate Governance

 Corporate governance failures can have significant negative impacts on
companies, their stakeholders, and the broader economy. Some notable
cases of corporate governance failures in India and elsewhere include

 Satyam Computer Services: In 2009, the chairman of Satyam Computer

Services, one of India's largest IT companies, admitted to financial fraud
and accounting irregularities. The scandal led to the collapse of the
company and criminal charges against the chairman and other executives.
The Satyam Computer Services scandal, also known as India's Enron, was a
major corporate governance and accounting fraud scandal that shook
India's IT industry in 2009. The scandal emerged when the chairman and
founder of Satyam Computer Services, B. Ramalinga Raju, admitted in a
letter to the company's board of directors that he had falsified the
company's accounts for several years, inflating revenues and profits by
millions of dollars.
Raju's confession shocked the industry, as Satyam was considered one of
India's most respected IT companies, and Raju himself was a prominent
figure in India's business community. The revelation triggered a massive
sell-off of Satyam shares, leading to the collapse of the company's stock
price and wiping out billions of dollars in shareholder value.
The scandal led to criminal charges against Raju and several other
executives, as well as regulatory investigations and lawsuits by investors.
Raju and his brother, who was also implicated in the scandal, were
arrested and charged with various offenses, including fraud, forgery, and
criminal conspiracy.
The Satyam scandal highlighted the need for stronger corporate
governance and oversight in India, and led to a series of regulatory
reforms aimed at improving transparency, accountability, and investor
protection. The scandal also had significant ripple effects on the IT industry
and the Indian economy, as it shook investor confidence and led to
increased scrutiny of other companies and their accounting practices.
In 2018, the Securities and Exchange Board of India (SEBI) imposed a
penalty of Rs 13 crore on Raju and other executives for violating insider
trading regulations related to the Satyam scandal. The case remains a
cautionary tale of the importance of good corporate governance, ethical
leadership, and the need for effective regulatory oversight.

Corporate Governance
Failures
 Enron: Enron, a US energy company, collapsed in 2001 due to accounting
fraud and corporate governance failures. The scandal led to criminal
charges against top executives and highlighted the need for better
corporate governance practices in the US and globally.

 Volkswagen: In 2015, Volkswagen admitted to cheating emissions tests on

its diesel cars, leading to a major scandal and significant financial and
reputational damage to the company. The scandal raised questions about
the effectiveness of corporate governance and regulatory oversight in the
automotive industry.

 Infosys: In 2017, the founder and former chairman of Infosys, one of

India's largest IT companies, raised concerns about corporate governance
practices at the company, leading to the resignation of the CEO and other
top executives. The incident highlighted the importance of strong
corporate governance practices and the need for greater transparency and
accountability.

 Wells Fargo: In 2016, Wells Fargo, a US bank, admitted to opening millions

of unauthorized customer accounts, leading to a major scandal and
regulatory investigations. The scandal highlighted the need for effective
corporate governance and risk management practices in the banking
industry.
 Conclusion

 Corporate governance is an essential component of effective

corporate management and helps to ensure that companies
operate in a responsible, transparent, and sustainable manner.
Strong regulations and guidelines, such as those in India, can
help to promote good corporate governance practices, while
failures in corporate governance can have significant negative
consequences for companies and their stakeholders.

 Corporate governance is a critical aspect of effective corporate

management, and strong regulations and guidelines are
necessary to ensure that companies operate in a responsible,
transparent, and sustainable manner. Corporate governance
failures can have significant negative consequences for
companies and their stakeholders, and it is important for
companies to prioritize good governance practices and
compliance with applicable laws and regulations .