Corporate Standards in India - Essay Example

?Corporate standards in India Task: Indian has been embroiled in several corporate scandals leading to lose of billions and jobs because of company collapse. Senior managers in the firms or investors have perpetrated these corporate scandals either during their off shoring of funds to the global market or during internal transactions. Therefore, this essay aims to find suitable methods that can be used to uphold corporate standards and avoid the occurrence of another scandal. There are different direct positive implications if these standards succeeded (Bhole 2008, p.78). For example, it would ensure more creation of jobs for the majority of the Indian youth, increased GDP and influx of foreign investors. Alternatively, it has an aesthetic sense of restoring the damaged integrity of the nation of India. On that note, the paper has expounded on several practical mechanisms such as the search for universal standards, instill corporate standards and implementing convergence of standards in the Indian companies among others. For the last five years, several corporate scandals have rocked India hence leading to the damage of its integrity. From Barclays issuing false numbers in the financial market of London to bribes-for-loans scandal, India has been wading in corporate graft (Bilal 2008, p.56). On that note, there are several ways to improve the corporate standards to save the image of India. This is to avoid financial losses and loss of jobs and resources. Therefore, the first method of upholding the corporate standard is to search for universal standards. It is imperative to observe that the mechanisms of corporate governance fluctuate from country to country. On that aspect, it is fundamental to note that political, economical and social perspectives define corporate governance (Buthwar 2011, p.78). This means the corporate practice of Indian companies should echo its set national ethos and value systems. For instance, in the Barclays scandal, its leadership should step down and investigated to reveal the motive of their virtues. Additionally, the form of corporate governance should be inculcated among managers and customers in order to understand the limits of conducting business transactions. This has a positive implication of reducing cases of corporate graft as observed in the recent years in India. Another crucial matter involves assimilation corporate philosophy among various organizations to avoid scandals such Forex derivates scam and Andhra Pradesh land that saw the companies lose $5.79 billion and $18.1 billion respectively. Alternatively, it is critical for major shareholders in such organizations to call for higher stakes in the contribution of the company. This suggests that despite the management of the company having a special status, shareholders should work in cooperation with the managers to avert cases of corporate scandals. Furthermore, it should be upon the corporate heads to increase globalization of encouraging competitive business that does not condone corruption. This is why the Organization for Economic Co-operation and Development (OECD) was established to work as a benchmark for monitoring Indian corporations. Another better method to instill corporate standards is to implement convergence of standards in the Indian companies. This entails shaping their corporate according the global market orientation such as in the US and UK in order to limit cases of fraud. For example, the telecoms scandal that made India lose up to $ 462 billion could have been avoided if better convergence standards were in place. In other words, the companies that acquired illegal licenses without proper qualification could not have resulted to such financial damage. Alternatively, the concerned corporations could have properly mitigated other scandals such as the Barclays and Mumbai Sales Tax fraud. Again, this method of standardization has the benefit of integrating financial markets and foreign investor requirements. This is known to encourage higher standards and practices of corporate governance. Similarly, it is paramount to evaluate investment proposals from the global perspective in order increase efficient corporate governance. This also has a direct impact on the value chain of such companies that abide by the stipulated investment goals. Furthermore, it will increase a high transparency and high premium standards on the capital markets and raise the investment appraisal of the companies. Apart from the aforementioned techniques of countering corporate fraud in most Indian companies, there are other alternatives. Initiation of good governance mechanism is fundamental in the nascent stage of such organizations in order to encourage early transparency and accountability. This means monitoring, management and control of business entities are accorded the highest priority to promote effectiveness. Another arising issue entails shareholders offering the risk capital that drives the performance standards of corporate organizations. Therefore, a symbiotic relationship would be forged that aligns with a proper structure of corporate governance. There is also a clear explanation of the role of institutional investors in order to maintain corporate standards in the Indian firms. On that note, institutional investors are mandated to view the benefits and costs of enjoying their voting rights during corporate decision-making. Similarly, the OECD ensures that costs and benefits voted in by investors are consistently regulated to uphold integrity. Alternatively, the rights of normal shareholders are required to play a significant role in increasing institutional shareholders. This also suggests that the institutional investors should select independent directors who encourage high governance standards. These will promote a decrease in the abuse of office and misappropriation of funds as witnessed in Telecom’s and Barclay’s scandal that resulted loss of billions. Furthermore, the rate of shareholding should have a high concentration that reflects the goals and objectives of the firm to uphold corporate governance. For example, an entity called SEBI has allowed multinational companies to accept only 10% of the initial public offerings in order to eradicate irregularities in accessing more funds and market dominance. This has been successful better mechanisms are in place that safeguards the welfare of non-promoter shareholders. Furthermore, institutions are tasked with ensuring that where public shareholdings are less, it should then conduct studies on how to elevate such firms from swindle and abuse of office. There is also equitable treatment of shareholders in order to strike a balance of class like other citizens of India doing business. Therefore, according to Indian Companies Act, shareholders are permitted to enjoy all the rights and freedoms equitably without any discrimination (Ninan, T 2012, p.54). This suggests that the type of shares and class accorded in the corporate sector should match of the natives to create a level ground of neutrality in transactions. Additionally, preference shareholders should enjoy special status because of the size of their shareholdings in the corporate market. All these suggests that upholding of corporate standards entails respecting shareholders who are the backbone of the business in order avoid scandals in corporate conflict such as IGI airport Scam, Coal Mining Scam and Karnataka Wakf Board Land Scam that resulted to lose of billions. On the other hand, any changes concerning the rights of normal shareholders should be regulated through voting rights that are consented by the shareholders. This also implies that the inclusion of the OECD principles is fundamental in prosecuting those found guilty with abuse of abuse and misappropriation of corporate funds. In summary, the sustained implementation of these corporate standards will ensure that transactions conducted by the corporations abide the OECD principles (Das 2008, p.90). Additionally, the inclusion of the government and other concerned stakeholders in the regulation of corporate ethics and standards will have direct influence on the internal market and creation of more opportunities. Another idea is to recruit experts from abroad who have expertise in investigating financial fraud to reduce the loss of billions that have been witnessed in the recent years. Alternatively, investors with the highest shares in the companies should enjoy the rights of investing more and widening the gap of corporate honesty. Bibliography Bhole, 2008, Financial Institutions and Markets, Cornell University Press, Ithaca. Bilal, L 2008, Financial Stability in Indian Markets, Cornell University Press, Ithaca. Buthwar, P 2011, Doing Business in India: Building Research-based Practice, Cornell University Press, Ithaca. Das, 2008, Corporate Governance In India; An Evaluation, PHI Learning Pvt. Ltd, New York. David, P 2008, Corporate Governance: The Story of India’s Scandals, PHI Learning Pvt. Ltd, New York. Davies, A 2011, The Globalisation of Corporate Governance: The Challenge of Clashing Cultures, Gower Publishing, Ltd, New York. Fernando, A 2009, Corporate Governance: Principles, Policies and Practices, Edgar Elgar Publishing Limited, Northampton. Gatline, K 2007, Modernization of Accounting Standards, Cambridge University Press, New York. Gerald, N 2010, ‘Indian corporate scandals’, The Economist, pp. 1-3. Godfrey, J & Chalmers, K 2007, Globalisation of Accounting Standards, Cambridge University Press, New York. Mandal, S 2010, Ethics in Business and Corp Governance, John Wiley & Sons, New York. Melvin, W 2010, Ethics and Conduct in Business: India Case Study, John Wiley & Sons, New York. Ninan, T 2012, ‘Corporate Scandals: Personal Accountability’, Indiacsr, pp. 1-2. Phillip, A 2006, Corporate Governance: How to accommodate investors in Multinational companies, Edgar Elgar Publishing Limited, Northampton. Vimal, P 2011, Art of Business in India, Cornell University Press, Ithaca. Read More