Description
This is a presentation highlights on role of good governance, mandatory requirements by SEBI.
“If you lose dollars for the firm,I will be understanding; If you lose reputation of the firm,I’ll be ruthless”. ---Warren Buffet
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“CG is the way an organisation is managed by policies and practices,that directly or indirectly affect its various performance parameters,as also the normally accepted,social,ethical and moral standards of the community and the laws of the land,through which it is accountable to all its stakeholders.”
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“Only two things are infinite: the Universe & Human Greed & I am not sure of the former” Einstein
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Surveys suggest that institutional investors will pay as much as 28% more for the shares of well-governed companies in emerging markets; A 10%-12% increase in market valuation; Ability to attract and retain the best people; A high corporate brand equity.
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Research by UK’s Institute of Business Ethics provides strong evidence(as if it’s needed!) that those companies clearly committed to ethical behavior,perform better financially over the long term, than those lacking such commitment.
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The ethically committed,had an average EVA of Sterling 473 million in 2000,as compared to Sterling 22 million for the rest! The MVA showed an average of Sterling 15.1 billion in 2000 for those with the ethics code,as compared to Sterling 2.1 billion for those without;
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The first group had more stable price/earnings ratios between 1997 & 2001—significant,as it attracts capital at below average cost; The first group out-performed the other—as it was able to wring higher productivity from its employees.
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And lastly,the first group had an average of 18% higher profit as a percentage of turnover.
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Corporate Reputation (CR) has an economic value,because it is difficult to imitate;rivals simply can’t replicate the unique features & intricate processes which produce that reputation. Charles J. Fombin
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Both CRISIL & ICRA have assigned the highest rating in CG to Infosys Technologies; S&P has given a score of 8.6 to Infosys,the first Indian co. to get a score.It says: “Infosys has demonstrated strong standards of CG”. Infosys scored 9.0 for ownership structure & influence,8.3 for financial stakeholder rights & relations,9.2 for financial transparency & info.disclosure,& 8.0 for Board structure & process….Bus.Standard,14.04.04
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Voluntary and full disclosures; Transparency; Continual communication to all stakeholders; Demonstration of these attributes by the top leadership,esp.by the CEO; Practise what you preach.
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Honesty Trust Commitment Ownership Relationship building Teamwork Customer orientation
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The CEO and the Board must enunciate these policies and vigorously practise and institutionalize them; And review them regularly; Do unto others the way you would want others to do unto you! It’s pure common sense!
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Have you heard of a company rewarding and promoting an efficient employee for honesty & integrity? Or for questioning his/her superior on an issue concerning honesty or integrity? Excellent leaders lead both morally and effectively.
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Great companies (I mean great, not necessarily big) are not in business solely for money. Money is only a by-product of doing the right things all the time and every time; They have a broader notion of why they are in business.They have values which are reflected in everything they do and in their employees’ expectations; Trust & transparency are the glue of CG; That’s why such companies make a lot of money!
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While PG has been made mandatory in some countries,not so in India yet; Recommendations have been made by various committees on CG; However,no amount of regulation will help I feel that self-governance and self management,are the only effective way to purify oneself and one’s organization.
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SEC plans to tighten its Related Party Transactions(RPT)rules; NYSE & NASDAQ get SEC approval for increasing the independence of Boards; Sarbanes Oxley Act passed in 2002; Higgs & Smith Report (UK); Naresh Chandra Committee Report(India); Narayana Murthy Comm.Report(India).
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All of them focus on: Disclosure; Board constitution; Audit committee; Relationship with Audit/consultancy firms; attorneys; Only SOx has has recognized “whistleblowers” & gives them protection.
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Just about everywhere,the battle-cry is for more transparency in accounting & greater checks & balance between managements & the boards; UK,Switzerland,Scandinavia,Germany, Russia,in Europe; China,Hong Kong,Indonesia,Malaysia,Philippines,Singapor e,South Korea,Taiwan & Thailand, in Asia.
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A company’s BOD must have at least 50% nonexecutive directors;in case of a non-exec. Chairman,at least 1/3 must be independent; The audit committee must be set up with a minimum of three members,all nonexec.directors, majority being independent;one of them “having financial & accounting knowledge”; the chairman shall be an independent director
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Remuneration of the non-exec.directors shall be decided by the board,with full disclosure in the annual report; Meetings of the BOD must be held at least four times a year,with a maximum time gap of four months between any two meetings
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A director shall not be a member in more than 10 committees across all companies,in which he is a director; it is mandatory for him to inform the companies the positions he occupies & notify changes, every year; The contents of the “Directors’ Report”,in the Annual Report to shareholders defined;
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Shareholders must be provided information about new directors as well as of reappointed directors; Quarterly results,presentations to industry analysts etc., must be put on the company’s website,or sent in such form as to enable the SE on which the company is listed,to put it on its own website;
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A board committee,under the chairmanship of a non-executive director shall be formed to specially look into shareholder & investor complaints like transfer of shares,non-receipt of the balance-sheet & declared dividends,& redress them.
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Enron had more than 50% independent directors; The chairman of its audit committee was of irrefutable reputation,as the dean of Stanford Business School; It was declared as the “most innovative company”for five successive years by Fortune magazine;
Enron… ? McKinsey & Co., was its consultant & collected fees of a cool $10 million per year! ? It had top ratings from every rating agency until days before its filing for chapter 11! ? Lynn Turner,former Chief Acct. of SEC,admitted that all the “Big five accounting firms helped Wall St.investment firms to engineer hypothetical transactions to make them look better”.
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“The real issues that determine the quality of CG,are the issues of the heart. No law,rule or rating can be an effective measure; CG ratings could be better served if the recommendations of the Narayana Murthy & the Naresh Chandra committee are implemented”…Mr.Madhav Mehra,President,World Council for CG quoted in the Business Standard,14.04.04
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Calpers,the largest US public pension fund with assets of 167 billion, which has become a leading force in good CG, advocates completely independent Boards. “…the US law does not provide adequate structure for shareholder defense”…Bob Monks,a CG expert
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As per Transparency International,the corruption perception index(CPI) for India is 2.7.(Most corrupt is zero); South Korea’s is 4.0;China’s is 3.5. South Korea’s per capita income is 7.5 times that of India and 1.7 times that of China; India’s growth between 1990 and 2000 was under 6% p.a.,while that of China was 10%! Corp.corruption can also adversly affect CG.
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In a survey,60% of CFOs at US multinationals said that the CG reforms had gone too far; Even Wm.Donaldson,the chairman of SEC has expressed concern that the wave of reforms is stifling corporate risk-taking; More & more execs. are complaining of the cost of compliance with the new regulations
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The extra cost comes out of the shareholders’ pockets,they point out; “If you are a private company,contemplating going public,you would think twice about it now”,said the CFO of one of the largest companies in the world.
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“The competitiveness of the American companies is threatened; you will find them climbing into a foxhole & hiding,rather than trying to be competitive in the marketplace.I don’t think its good for the consumers,for the companies or the countries involved;they are focusing on complying with financial rules at the expense of their core business”John Devine,CFO,GM
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Personal greed, selfish ambition, lack of integrity, moral laxity,lax oversight, fear of outside analysts, & outright fraud are the root causes. They have come to pervade even some of the bluest of the blue chip corporations; On the following slides are some of the shameful & incredible(but true) examples:
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Bernard Ebbers,founder and former CEO,WorldCom,for falsely inflating earnings by over $11billion! Gary Winnick,founder/chairman,Global Crossing for selling bandwidth to customers and buying back the similar amounts on customers’ networks.He cashed out $512 million in Company stock,before the stock crashed. Kenneth Lay former CEO,Enron,for hiding more than $ 8 billion in debt and inflating profit.
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He also amassed $ 247 million on his own and, with others,reaped a further $ 591 million!Also owes the company $ 70 million in loans. Joseph Nacchio,former CEO,Qwest Communications,took in more than $ 200 million between pay and stock sales,before the Co.got into trouble for a $1.2 billion financial jugglery. AOL-Time-Warner,for writing off $98 billionthe largest in corporate history.
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John Rigas,founder/former CEO,Adelphia Communications Corp.,received more than $67 million in undisclosed loans and $1 million every month for 2 years.Stockholder loss was $60 billion. Dennis Kozlowski,former CEO,Tyco International for evading sales tax,of more than $1 million, on sale of his paintings plus other transactions involving theft and fraud, amounting to $600m. Computer Associates,for giving a $1.1 billion pay package to three of its top executives,6 years ago.
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On April 8,2004,three former executives of CA pleaded guilty to securities fraud throughout the 1990s; They used accounting tricks to overstate sales & profits to shore up the stock price; One of the three,CA’s CFO faces up to 20 years in prison;the other two,up to 10 years; Could be reduced if they continue to cooperate in the investigation.
Merck admitting to $ 14 billion revenue overstatement. ? Eminent Wall Street Investment Bankers CSFB & Merrill Lynch fined $ 100 million each. ? Xerox Corp.,for accounting fraud. ? Stagecoach:Accounting irregularities- 600 mill. ? In all top execs. grossed about $3.3 billion in 3 years. ? Ford,Firestone for hiding faults in tyre design,killing hundreds of people.
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NYSE paid $139 million to its Chairman…more than the Exchange’s combined net income for the last three full years. Hyundai secretly paid $500 million to North Korea thus violating Korean FE laws & shareholders trust.Founder’s son ends life.
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AT&T charges MCI with Racketeering…fraud results in tens of millions of dollars of losses. Illicit trading schemes in US Mutual Funds cost small investors up to $5 billion p.a. Ex-treasurer of Enron to go to prison for a fiveyear term.
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Three of the biggest Accounting firms-PWC, KPMG LLP and Ernst & Young-accused of over-billing/padding clients for travel.over a ten year period. Recent Survey in the USA,showed the Trust Index on CEOs is about the same as Used-car salesmen!
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$ 35 billion, as much as a $ 10 increase in the price of a barrel of oil! It would shave off 0.34% of GDP in a year!!(Brookings Institution,the Washington Think Tank); Hundreds of billions of dollars of investor wealth lost; Loss of pension and 401k plans since year 2000:$7 trillion!! About 100,000 people lost their jobs.
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Directors who fail to direct, CEOs who fail at moral leadership,Auditors who fail to audit,Analysts who deliberately mislead investors,Bankers who conspire with the CEOs/CFOs to make money, Regulators & Lawmakers joining those that they are supposed to regulate to make a fast buck…..are a huge threat to civilized society,all over the world.
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“I feel thoroughly disillusioned & disgusted.These people cannot police themselves; greed is their driver, it’s time for shareholders to start showing their disillusionment in tangible ways.” …a frustrated shareholder
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“When the Justice Dept.,& the SEC get their act together & start sending a few CEOs & CFOs to jail,you’ll see a real wake-up call ”. -- A frustrated & bitter shareholder; Personally,I don’t think this is a sustainable solution.
Circumstantial and anecdotal evidence shows they are as neck-deep in accounting jugglery as their American counterparts. ? Trouble is,while we have a plethora of laws,the enforcement is pitifully poor; ? So,hardly has any CEO/CFO been convicted & jailed.
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71% of the frauds detected were due to “weakening of values” says the 1998-99 report; The security gaps included:27% due to collusion between employees & management;18% due to poor or non-existent Corporate ethics and 18% due to management overriding internal controls;
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We desperately need “Happiness” Management Systems; Vedanta guides individuals for the progressive realization of “Aananda” while living in the materialistic world, through “Purushartha” (self effort).
Purushartha incorporates four values: kama (vital value),artha (material value),dharma (ethical value) and, moksha,(spiritual value); ? If we adopt it,our minds are transformed from tamasik and rajasik states to the sattvik state; ? And our organisation too becomes sattvik and satisfies all stakeholders.
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Vedanta is designed to manage oneself and hence effectively manage one’s worldly affairs; A powerful intellect can control the mind and the mind’s impulses; Intellect does not mean mere intelligence.It is developed from original thinking and independent reflexion; It is not knowledge transferred from the teacher to the taught; It gives one the power of reason, to work systematically and methodically.
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Self-management: Habits,good & bad form the basis of our character; Regular practice of yoga & meditation,gives us mental strength,a disease-free life,& a higher purpose in life; It also leads us to lead a principle-centred life,comprising,honesty,integrity (to create a foundation of trust),respect for human dignity,fair-play & humility; And to become a role-model.
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Vedanta is a technology, a science of how to live. Living is a skill we must all learn to be good at. Science improves the world;Vedanta improves the individual.
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Two energies propel humans-the mind & the intellect(not to be confused with intelligence); Intellect cannot be not taught; it is this difference that separates those who possess it, from animals.
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A strong intellect controls the mind,its whims & fancies; Humans are driven by acquisition & enjoyment; There is no limit to both these; Vedanta does not bar you from acquiring; it simply tells you not to link your present happiness to your future acquisitions.
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Vedanta,in fact,rescues us from being victimized by our own mind; India is the only country which has Science &Vedanta working for it.It needs to be utilized…Swami Parthasarathy.
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The real India is not what you read in the newspapers,or see in the filth & slums on the sidewalks,or in the blatant corruption,that is almost all pervasive; The real India comprises the universal truths enshrined in our Vedas & the Upanishads,to explore the inner world of our mind,our personality, our intellect, our consciousness,& never to stop until the end is reached.
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What makes India truly unique,is that it is the only civilization in the world that oriented its entire existence around the purpose of selfrealization; Its every system is devised to take us closer to it; Right from its music,dance, art & sculpture,architecture,healing systems like Ayurveda & Siddha, divination sciences like Astrology, to transcendental paths like Yoga & Meditation;
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Even our daily lives emphasize the interconnection of life,& the primacy of spirit over matter; Our civilization has stood for the harmonious,self-sustaining way of life,based on the laws of Nature;
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Our housing,clothing,food,are all provided by Nature & in turn returned to it,after use; Self-sustaining cycles of agriculture/mining ensure that what we take from the soil,is returned to it in the shape of manure & compost; Rooted in Nature,with plenty of fresh air & clean water,our ancestors lived a life of intelligent thrift,treading lightly the earth,using as little of her resources as possible, preserving it for posterity.
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In the process they never lost sight of their goal of self-realization & the transcendence of their desires; Because everything was divine & therefore sacred,everything was (& still is) worshipped; Rivers,mountains,trees,shrubs,animals;inanima te objects like tools,implements etc., are still worshipped.
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Says an awakened IIT & IIM alumnus: “Do not try to learn the tricks of another race.Do not seek to imitate the ways of those who have lived differently from you. Instead, be yourself.” “India has always sought for itself peace instead of war, satisfaction instead of greed, gentleness instead of pride & anger.This India is within each of us.”
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As a people,we are overwhelmingly heartoriented, not head-oriented; For us relationships matter; we have a humanistic approach to people; We are warm & hospitable to even strangers; We respect elders and value family; We equate our teachers with God.
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The Indian mind has a penchant for looking at the whole picture,like Ayurveda,which looks at the whole human system & not just at the illness; This thinking is at a higher level than fragmentary type of thinking; The Indian mind has a talent for synthesis,for finding the unity in diversity,for seeing the big picture; It is this that makes us visionaries and particularly talented for the task of selfrealization.
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In India what we call experience,intuition,reveals all things simultaneously,like a flash of lightening; Hence truth is seen in its totality; Today,everywhere,the wave is in favour of spirituality ; Yoga & Meditation are straddling the world rapidly & the New Age culture that is slowly gathering pace,is based on the premises of Vedas-of inborn divinity & interconnection.
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There are also worldwide movements toward preserving bio-diversity….that place emphasis on a harmonious relationship with Nature; India’s mission is slowly realizing itself; its greatness lies in this, & not in supremacy in the economic or political arenas.
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We may never be another America or Japan; we may never have countries fawning over us;we may never become the richest nation in the world; But our greatness will lie in our humility,our respect for others,our sense of service, & above all,in our determination to win self-realization for ourselves & others; And the wise among us will never trade our type of greatness for any other.
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With the new frenzied levels of competition,soaring stress levels, damaging effect on family & relationships,the destruction of the environment,our propensity to mimic other cultures at the cost of our own,India is headed towards unmitigated disaster.
My mission is to lead a wholesome & contented life, based on integrity, high standards of morality, ethics, fairness, thrift & simplicity and make a substantial contribution to the company I work for, to improve the quality of life of my colleagues, as much as of my own.
To fulfil this mission: I will: 1. Demonstrate and teach the above principles to those around me, who are ready to listen and learn. 2. Create a team spirit to achieve common goals and objectives especially the financial targets, in the organization I work.
3. Seek more knowledge than may be necessary for doing my job on subjects of interest to me in a more innovative & creative manner viz. Management Principles & Trends, Marketing, Sales and the Indian Scriptures which are a limitless fountain of wisdom. 4. Develop leadership qualities in myself and those around me to get things done in the optimum time, effort and cost, based on our
5. Learn to be a good follower, especially of the law of the land, company policies, rules & regulations and of the people I respect and admire. 6. Try to be a good listener as also look at issues the others’ point of view. from
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Make the management of the company I work in, as transparent as possible. Try to be always punctual as I value the time of the other people. It is also an acid test of how I am managing myself. Regularly practice Yoga & TM to enrich my inner self, to comfortably absorb the pressures and the tensions of the job and still maintain a high level of physical & mental fitness.
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Put my company’s progress, prosperity and success before my own.
Respect all individuals irrespective of their colour, nationality, sex, religion, caste, creed & position. Serve my company’s internal and external customers in the best possible manner to establish a lasting relationship.
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Fight injustice in my sphere of activities with all the power & strength I have.
Demonstrate value addition in everything I do and at all times. Quit working when I feel that I am unable to add value to the company. Never forget the quality of humility.
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Millions of investors and employees have suffered huge losses, due to the greed of a small minority of CEOs & Directors on the Boards of Companies,due to poor governance No amount of legislation can cure this cancer All the known systems of Management have also failed I firmly believe only our Vedanta principles have a chance of solving the problem.
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Our education system should teach us not only how to make a living but also how to live; The CEO must surround himself/herself with skeptics & encourage dissent ie,banish the “yes -man” culture.
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“We look upon business not merely as a source of income or profit,but as a way of life,as a medium for putting our talents to good use,while at the same time affording us an opportunity to be of service to the the community.Profits will follow.Let us remember that profit is not just a set of figures--- but of values”-Late Mr.R.D.Aga,Founder,Thermax India,.
doc_618167343.pptx
This is a presentation highlights on role of good governance, mandatory requirements by SEBI.
“If you lose dollars for the firm,I will be understanding; If you lose reputation of the firm,I’ll be ruthless”. ---Warren Buffet
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“CG is the way an organisation is managed by policies and practices,that directly or indirectly affect its various performance parameters,as also the normally accepted,social,ethical and moral standards of the community and the laws of the land,through which it is accountable to all its stakeholders.”
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“Only two things are infinite: the Universe & Human Greed & I am not sure of the former” Einstein
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Surveys suggest that institutional investors will pay as much as 28% more for the shares of well-governed companies in emerging markets; A 10%-12% increase in market valuation; Ability to attract and retain the best people; A high corporate brand equity.
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Research by UK’s Institute of Business Ethics provides strong evidence(as if it’s needed!) that those companies clearly committed to ethical behavior,perform better financially over the long term, than those lacking such commitment.
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The ethically committed,had an average EVA of Sterling 473 million in 2000,as compared to Sterling 22 million for the rest! The MVA showed an average of Sterling 15.1 billion in 2000 for those with the ethics code,as compared to Sterling 2.1 billion for those without;
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The first group had more stable price/earnings ratios between 1997 & 2001—significant,as it attracts capital at below average cost; The first group out-performed the other—as it was able to wring higher productivity from its employees.
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And lastly,the first group had an average of 18% higher profit as a percentage of turnover.
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Corporate Reputation (CR) has an economic value,because it is difficult to imitate;rivals simply can’t replicate the unique features & intricate processes which produce that reputation. Charles J. Fombin
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Both CRISIL & ICRA have assigned the highest rating in CG to Infosys Technologies; S&P has given a score of 8.6 to Infosys,the first Indian co. to get a score.It says: “Infosys has demonstrated strong standards of CG”. Infosys scored 9.0 for ownership structure & influence,8.3 for financial stakeholder rights & relations,9.2 for financial transparency & info.disclosure,& 8.0 for Board structure & process….Bus.Standard,14.04.04
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Voluntary and full disclosures; Transparency; Continual communication to all stakeholders; Demonstration of these attributes by the top leadership,esp.by the CEO; Practise what you preach.
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Honesty Trust Commitment Ownership Relationship building Teamwork Customer orientation
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The CEO and the Board must enunciate these policies and vigorously practise and institutionalize them; And review them regularly; Do unto others the way you would want others to do unto you! It’s pure common sense!
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Have you heard of a company rewarding and promoting an efficient employee for honesty & integrity? Or for questioning his/her superior on an issue concerning honesty or integrity? Excellent leaders lead both morally and effectively.
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Great companies (I mean great, not necessarily big) are not in business solely for money. Money is only a by-product of doing the right things all the time and every time; They have a broader notion of why they are in business.They have values which are reflected in everything they do and in their employees’ expectations; Trust & transparency are the glue of CG; That’s why such companies make a lot of money!
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While PG has been made mandatory in some countries,not so in India yet; Recommendations have been made by various committees on CG; However,no amount of regulation will help I feel that self-governance and self management,are the only effective way to purify oneself and one’s organization.
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SEC plans to tighten its Related Party Transactions(RPT)rules; NYSE & NASDAQ get SEC approval for increasing the independence of Boards; Sarbanes Oxley Act passed in 2002; Higgs & Smith Report (UK); Naresh Chandra Committee Report(India); Narayana Murthy Comm.Report(India).
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1.
2. 3.
4.
5.
All of them focus on: Disclosure; Board constitution; Audit committee; Relationship with Audit/consultancy firms; attorneys; Only SOx has has recognized “whistleblowers” & gives them protection.
?
Just about everywhere,the battle-cry is for more transparency in accounting & greater checks & balance between managements & the boards; UK,Switzerland,Scandinavia,Germany, Russia,in Europe; China,Hong Kong,Indonesia,Malaysia,Philippines,Singapor e,South Korea,Taiwan & Thailand, in Asia.
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A company’s BOD must have at least 50% nonexecutive directors;in case of a non-exec. Chairman,at least 1/3 must be independent; The audit committee must be set up with a minimum of three members,all nonexec.directors, majority being independent;one of them “having financial & accounting knowledge”; the chairman shall be an independent director
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Remuneration of the non-exec.directors shall be decided by the board,with full disclosure in the annual report; Meetings of the BOD must be held at least four times a year,with a maximum time gap of four months between any two meetings
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A director shall not be a member in more than 10 committees across all companies,in which he is a director; it is mandatory for him to inform the companies the positions he occupies & notify changes, every year; The contents of the “Directors’ Report”,in the Annual Report to shareholders defined;
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Shareholders must be provided information about new directors as well as of reappointed directors; Quarterly results,presentations to industry analysts etc., must be put on the company’s website,or sent in such form as to enable the SE on which the company is listed,to put it on its own website;
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A board committee,under the chairmanship of a non-executive director shall be formed to specially look into shareholder & investor complaints like transfer of shares,non-receipt of the balance-sheet & declared dividends,& redress them.
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Enron had more than 50% independent directors; The chairman of its audit committee was of irrefutable reputation,as the dean of Stanford Business School; It was declared as the “most innovative company”for five successive years by Fortune magazine;
Enron… ? McKinsey & Co., was its consultant & collected fees of a cool $10 million per year! ? It had top ratings from every rating agency until days before its filing for chapter 11! ? Lynn Turner,former Chief Acct. of SEC,admitted that all the “Big five accounting firms helped Wall St.investment firms to engineer hypothetical transactions to make them look better”.
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“The real issues that determine the quality of CG,are the issues of the heart. No law,rule or rating can be an effective measure; CG ratings could be better served if the recommendations of the Narayana Murthy & the Naresh Chandra committee are implemented”…Mr.Madhav Mehra,President,World Council for CG quoted in the Business Standard,14.04.04
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Calpers,the largest US public pension fund with assets of 167 billion, which has become a leading force in good CG, advocates completely independent Boards. “…the US law does not provide adequate structure for shareholder defense”…Bob Monks,a CG expert
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As per Transparency International,the corruption perception index(CPI) for India is 2.7.(Most corrupt is zero); South Korea’s is 4.0;China’s is 3.5. South Korea’s per capita income is 7.5 times that of India and 1.7 times that of China; India’s growth between 1990 and 2000 was under 6% p.a.,while that of China was 10%! Corp.corruption can also adversly affect CG.
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In a survey,60% of CFOs at US multinationals said that the CG reforms had gone too far; Even Wm.Donaldson,the chairman of SEC has expressed concern that the wave of reforms is stifling corporate risk-taking; More & more execs. are complaining of the cost of compliance with the new regulations
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The extra cost comes out of the shareholders’ pockets,they point out; “If you are a private company,contemplating going public,you would think twice about it now”,said the CFO of one of the largest companies in the world.
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“The competitiveness of the American companies is threatened; you will find them climbing into a foxhole & hiding,rather than trying to be competitive in the marketplace.I don’t think its good for the consumers,for the companies or the countries involved;they are focusing on complying with financial rules at the expense of their core business”John Devine,CFO,GM
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Personal greed, selfish ambition, lack of integrity, moral laxity,lax oversight, fear of outside analysts, & outright fraud are the root causes. They have come to pervade even some of the bluest of the blue chip corporations; On the following slides are some of the shameful & incredible(but true) examples:
?
?
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Bernard Ebbers,founder and former CEO,WorldCom,for falsely inflating earnings by over $11billion! Gary Winnick,founder/chairman,Global Crossing for selling bandwidth to customers and buying back the similar amounts on customers’ networks.He cashed out $512 million in Company stock,before the stock crashed. Kenneth Lay former CEO,Enron,for hiding more than $ 8 billion in debt and inflating profit.
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He also amassed $ 247 million on his own and, with others,reaped a further $ 591 million!Also owes the company $ 70 million in loans. Joseph Nacchio,former CEO,Qwest Communications,took in more than $ 200 million between pay and stock sales,before the Co.got into trouble for a $1.2 billion financial jugglery. AOL-Time-Warner,for writing off $98 billionthe largest in corporate history.
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John Rigas,founder/former CEO,Adelphia Communications Corp.,received more than $67 million in undisclosed loans and $1 million every month for 2 years.Stockholder loss was $60 billion. Dennis Kozlowski,former CEO,Tyco International for evading sales tax,of more than $1 million, on sale of his paintings plus other transactions involving theft and fraud, amounting to $600m. Computer Associates,for giving a $1.1 billion pay package to three of its top executives,6 years ago.
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On April 8,2004,three former executives of CA pleaded guilty to securities fraud throughout the 1990s; They used accounting tricks to overstate sales & profits to shore up the stock price; One of the three,CA’s CFO faces up to 20 years in prison;the other two,up to 10 years; Could be reduced if they continue to cooperate in the investigation.
Merck admitting to $ 14 billion revenue overstatement. ? Eminent Wall Street Investment Bankers CSFB & Merrill Lynch fined $ 100 million each. ? Xerox Corp.,for accounting fraud. ? Stagecoach:Accounting irregularities- 600 mill. ? In all top execs. grossed about $3.3 billion in 3 years. ? Ford,Firestone for hiding faults in tyre design,killing hundreds of people.
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NYSE paid $139 million to its Chairman…more than the Exchange’s combined net income for the last three full years. Hyundai secretly paid $500 million to North Korea thus violating Korean FE laws & shareholders trust.Founder’s son ends life.
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AT&T charges MCI with Racketeering…fraud results in tens of millions of dollars of losses. Illicit trading schemes in US Mutual Funds cost small investors up to $5 billion p.a. Ex-treasurer of Enron to go to prison for a fiveyear term.
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Three of the biggest Accounting firms-PWC, KPMG LLP and Ernst & Young-accused of over-billing/padding clients for travel.over a ten year period. Recent Survey in the USA,showed the Trust Index on CEOs is about the same as Used-car salesmen!
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$ 35 billion, as much as a $ 10 increase in the price of a barrel of oil! It would shave off 0.34% of GDP in a year!!(Brookings Institution,the Washington Think Tank); Hundreds of billions of dollars of investor wealth lost; Loss of pension and 401k plans since year 2000:$7 trillion!! About 100,000 people lost their jobs.
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Directors who fail to direct, CEOs who fail at moral leadership,Auditors who fail to audit,Analysts who deliberately mislead investors,Bankers who conspire with the CEOs/CFOs to make money, Regulators & Lawmakers joining those that they are supposed to regulate to make a fast buck…..are a huge threat to civilized society,all over the world.
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“I feel thoroughly disillusioned & disgusted.These people cannot police themselves; greed is their driver, it’s time for shareholders to start showing their disillusionment in tangible ways.” …a frustrated shareholder
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“When the Justice Dept.,& the SEC get their act together & start sending a few CEOs & CFOs to jail,you’ll see a real wake-up call ”. -- A frustrated & bitter shareholder; Personally,I don’t think this is a sustainable solution.
Circumstantial and anecdotal evidence shows they are as neck-deep in accounting jugglery as their American counterparts. ? Trouble is,while we have a plethora of laws,the enforcement is pitifully poor; ? So,hardly has any CEO/CFO been convicted & jailed.
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71% of the frauds detected were due to “weakening of values” says the 1998-99 report; The security gaps included:27% due to collusion between employees & management;18% due to poor or non-existent Corporate ethics and 18% due to management overriding internal controls;
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We desperately need “Happiness” Management Systems; Vedanta guides individuals for the progressive realization of “Aananda” while living in the materialistic world, through “Purushartha” (self effort).
Purushartha incorporates four values: kama (vital value),artha (material value),dharma (ethical value) and, moksha,(spiritual value); ? If we adopt it,our minds are transformed from tamasik and rajasik states to the sattvik state; ? And our organisation too becomes sattvik and satisfies all stakeholders.
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Vedanta is designed to manage oneself and hence effectively manage one’s worldly affairs; A powerful intellect can control the mind and the mind’s impulses; Intellect does not mean mere intelligence.It is developed from original thinking and independent reflexion; It is not knowledge transferred from the teacher to the taught; It gives one the power of reason, to work systematically and methodically.
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Self-management: Habits,good & bad form the basis of our character; Regular practice of yoga & meditation,gives us mental strength,a disease-free life,& a higher purpose in life; It also leads us to lead a principle-centred life,comprising,honesty,integrity (to create a foundation of trust),respect for human dignity,fair-play & humility; And to become a role-model.
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Vedanta is a technology, a science of how to live. Living is a skill we must all learn to be good at. Science improves the world;Vedanta improves the individual.
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Two energies propel humans-the mind & the intellect(not to be confused with intelligence); Intellect cannot be not taught; it is this difference that separates those who possess it, from animals.
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A strong intellect controls the mind,its whims & fancies; Humans are driven by acquisition & enjoyment; There is no limit to both these; Vedanta does not bar you from acquiring; it simply tells you not to link your present happiness to your future acquisitions.
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Vedanta,in fact,rescues us from being victimized by our own mind; India is the only country which has Science &Vedanta working for it.It needs to be utilized…Swami Parthasarathy.
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The real India is not what you read in the newspapers,or see in the filth & slums on the sidewalks,or in the blatant corruption,that is almost all pervasive; The real India comprises the universal truths enshrined in our Vedas & the Upanishads,to explore the inner world of our mind,our personality, our intellect, our consciousness,& never to stop until the end is reached.
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What makes India truly unique,is that it is the only civilization in the world that oriented its entire existence around the purpose of selfrealization; Its every system is devised to take us closer to it; Right from its music,dance, art & sculpture,architecture,healing systems like Ayurveda & Siddha, divination sciences like Astrology, to transcendental paths like Yoga & Meditation;
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Even our daily lives emphasize the interconnection of life,& the primacy of spirit over matter; Our civilization has stood for the harmonious,self-sustaining way of life,based on the laws of Nature;
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Our housing,clothing,food,are all provided by Nature & in turn returned to it,after use; Self-sustaining cycles of agriculture/mining ensure that what we take from the soil,is returned to it in the shape of manure & compost; Rooted in Nature,with plenty of fresh air & clean water,our ancestors lived a life of intelligent thrift,treading lightly the earth,using as little of her resources as possible, preserving it for posterity.
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In the process they never lost sight of their goal of self-realization & the transcendence of their desires; Because everything was divine & therefore sacred,everything was (& still is) worshipped; Rivers,mountains,trees,shrubs,animals;inanima te objects like tools,implements etc., are still worshipped.
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Says an awakened IIT & IIM alumnus: “Do not try to learn the tricks of another race.Do not seek to imitate the ways of those who have lived differently from you. Instead, be yourself.” “India has always sought for itself peace instead of war, satisfaction instead of greed, gentleness instead of pride & anger.This India is within each of us.”
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As a people,we are overwhelmingly heartoriented, not head-oriented; For us relationships matter; we have a humanistic approach to people; We are warm & hospitable to even strangers; We respect elders and value family; We equate our teachers with God.
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The Indian mind has a penchant for looking at the whole picture,like Ayurveda,which looks at the whole human system & not just at the illness; This thinking is at a higher level than fragmentary type of thinking; The Indian mind has a talent for synthesis,for finding the unity in diversity,for seeing the big picture; It is this that makes us visionaries and particularly talented for the task of selfrealization.
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In India what we call experience,intuition,reveals all things simultaneously,like a flash of lightening; Hence truth is seen in its totality; Today,everywhere,the wave is in favour of spirituality ; Yoga & Meditation are straddling the world rapidly & the New Age culture that is slowly gathering pace,is based on the premises of Vedas-of inborn divinity & interconnection.
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There are also worldwide movements toward preserving bio-diversity….that place emphasis on a harmonious relationship with Nature; India’s mission is slowly realizing itself; its greatness lies in this, & not in supremacy in the economic or political arenas.
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We may never be another America or Japan; we may never have countries fawning over us;we may never become the richest nation in the world; But our greatness will lie in our humility,our respect for others,our sense of service, & above all,in our determination to win self-realization for ourselves & others; And the wise among us will never trade our type of greatness for any other.
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With the new frenzied levels of competition,soaring stress levels, damaging effect on family & relationships,the destruction of the environment,our propensity to mimic other cultures at the cost of our own,India is headed towards unmitigated disaster.
My mission is to lead a wholesome & contented life, based on integrity, high standards of morality, ethics, fairness, thrift & simplicity and make a substantial contribution to the company I work for, to improve the quality of life of my colleagues, as much as of my own.
To fulfil this mission: I will: 1. Demonstrate and teach the above principles to those around me, who are ready to listen and learn. 2. Create a team spirit to achieve common goals and objectives especially the financial targets, in the organization I work.
3. Seek more knowledge than may be necessary for doing my job on subjects of interest to me in a more innovative & creative manner viz. Management Principles & Trends, Marketing, Sales and the Indian Scriptures which are a limitless fountain of wisdom. 4. Develop leadership qualities in myself and those around me to get things done in the optimum time, effort and cost, based on our
5. Learn to be a good follower, especially of the law of the land, company policies, rules & regulations and of the people I respect and admire. 6. Try to be a good listener as also look at issues the others’ point of view. from
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Make the management of the company I work in, as transparent as possible. Try to be always punctual as I value the time of the other people. It is also an acid test of how I am managing myself. Regularly practice Yoga & TM to enrich my inner self, to comfortably absorb the pressures and the tensions of the job and still maintain a high level of physical & mental fitness.
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Put my company’s progress, prosperity and success before my own.
Respect all individuals irrespective of their colour, nationality, sex, religion, caste, creed & position. Serve my company’s internal and external customers in the best possible manner to establish a lasting relationship.
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Fight injustice in my sphere of activities with all the power & strength I have.
Demonstrate value addition in everything I do and at all times. Quit working when I feel that I am unable to add value to the company. Never forget the quality of humility.
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Millions of investors and employees have suffered huge losses, due to the greed of a small minority of CEOs & Directors on the Boards of Companies,due to poor governance No amount of legislation can cure this cancer All the known systems of Management have also failed I firmly believe only our Vedanta principles have a chance of solving the problem.
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Our education system should teach us not only how to make a living but also how to live; The CEO must surround himself/herself with skeptics & encourage dissent ie,banish the “yes -man” culture.
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“We look upon business not merely as a source of income or profit,but as a way of life,as a medium for putting our talents to good use,while at the same time affording us an opportunity to be of service to the the community.Profits will follow.Let us remember that profit is not just a set of figures--- but of values”-Late Mr.R.D.Aga,Founder,Thermax India,.
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