BUSINESS ETHICS AND CORPORATE GOVERNANCE 

Key words used in Stock Marketing

Corporate governance is the processes, system that are within the company created to ensure seamless flow of informationso people know their accountability and decision making skills. The primary force or responsibility lies with the board of directors. It causes doubt on the organisation, the company and the executive at large. Post the Harshad Mehta scam and the Satyam meltdown the regulators were taking more acting. Risk assurance makes sure the internal controls are in place. Transparency needs to be in place. Regular communication with stakeholders, committed leadership meetings where area of improvements are discussed.

Helps increase shareholder value, sustainable value for the future, increases the customers trust, it is everyone’s business.The internal audit team reports to the Board of directors and not the CEO. In Indian context SEBI acts as a regulator for companies who monitors the board of directors to ensure best practises are followed.

What is stock marketing?

Stocks have no contractual terms of payment and no majority. If earnings are adequate, most companies regularly pay dividends to stockholders. But there are no guarantees. Building on the teachings of accounting, equity ownership of the company entitles the owner to the residual claims on earnings and assets after all the other obligations, such as bonds, have been met. If there is no earning there is little valye to the stock. With adequate profits, bonds are paid on tome and hopefully there is a portion left for stockholders.

Define dividend Growth model.

One way that investment analysts try to value stocks is by valuing the dividend cash flow. This value model heavily weighs dividend growth in its formula. However, it does not always yield a reasonable answer.

Explain the recommendations of “Desirable Corporate Governance,” a code. 

Discuss how the shareholders theory of corporate governance is different from stakeholders theory? 

With the reference to the video PP Waterballs, explain the flaws of corporate law and governance observed.

Define accountability 

It relates to investors relationship. Investors have directly or indirectly entrusted management of company for the enhanced value of the investment. The company is hence obliged to make timely disclosure on regular basis to all its shareholders in order to maintain good corporate governance. Example: Nestle’s Maggi: The company was about to shut down. It didn’t inform about the hidden ingredients that cause cancer.

Name the four arthashastras:

  1. Raksha: To protect.
  2. Vriddhi: Growth of Stakeholders value enhancement.
  3. Palana: Maintainance or compliances in the present day context.
  4. Yogakema

What is corporate corruption?

It us not being transparent and not disclosing the company’s purpose.

What is the need for Corporate Governance?

  1. Enhancing enterprise valuation: Imporoved management accountibility and operational transparency to fulfill investors’ expectations and confidence on management and corporation and in return increase the value of the corporation.
  2. Compacting corruption: It can be attained by beingtransparent, having a sound system, full disclosure on accountability and auditing procedure, allow transparencyin all business transactions, provide an environment where corruption will certainly fade and Corporate Governance enables corporates to compensate more efficiently and prevent fraud and value of enterprise.
  3. Reduce risk of corporate crisis and scandals: Efficienct risk mitigation. 

How can the value of enterprise be enhanced?

It can be in enhanced by improving management accountability and operational transparency to fulfil investors expectations and confidence on management and corporations and in return increase the value of the corporations.

What is valuation?

Valuation is the process of buying a start-up idea.

Define ethics and explain the importance of good ethics for business people and business organizations.

Ethics would be morality as applied to any number of subjects, including journalistic ethics, business ethics, or the ethics of professionals such as doctors, attorneys, and accountants. Ethics or morality:

  1. Individuals 
  2. Corporations and nations

We tend to see individuals as having a soul, or at least a conscience, but there is no general agreement that nations or corporations have either. We tend to see individuals as having a soul, or at least a conscience, but there is no general agreement that nations or corporations have either. Ethics is the study of morality—“right” and “wrong”—in the context of everyday life, organizational behaviors, and even how society operates and is governed.

Understand the principal philosophies of ethics, including utilitarianism, duty-based ethics, and virtue ethics.

Distinguish between the ethical merits of various choices by using an ethical decision model.

Explain the difference between shareholder and stakeholder models of ethical corporate governance.

Explain why it is difficult to establish and maintain an ethical corporate culture in a business organization.

Explain how both individuals and institutions can be viewed as ethical or unethical.

For an individual, moral reputation is most often tied to others’ perceptions of his or her character: is the individual honest, diligent, reliable, fair, and caring?

Explain how law and ethics are different, and why a good reputation can be more important than legal compliance.

What is ethical is not necessarily legal. The well used term is legal loop-hole. Individuals and organizations have reputations. The reputation of an organization is built on the goodwill that suppliers, customers, the community, and employees feel toward it. Although an organization is not a person in the usual sense, the goodwill that people feel about the organization is based on their perception of its better qualities by a variety of stakeholders: customers or clients, suppliers, investors, employees, government officials). The goodwill of an organization is to a great extent based on the actions it takes and on whether the actions are favorably viewed. (This goodwill is usually specifically counted in the sale of a business as an asset that the buyer pays for. While it is difficult to place a monetary value on goodwill, a firm’s good reputation will generally call for a higher evaluation in the final accounting before the sale. Legal troubles or a reputation for having legal troubles will only lessen the price for a business and will even lessen the value of the company’s stock as bad legal news comes to the public’s attention.)

Who are independent directors and their role in corporate governance 

He has a very important role. He has an outsider role who doesn’t have a relationship with a company from far end. So he cannot be partial. According to provisions of sections 197 and 198, an independent director shall not be entitled to any stock option and may receive remuneration by way of fees. Reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.

Provision 52: An independent director shall hold office for a term of five consecutive years on the Board of company. Shall be eligible for reappointment on passing of special resoultion by the company and disclosure of such appointments in the Board’s report. 

Sub-section 10: No independent director shall hold office for more than two consecutive terms, such director should be eligible for appointment after the expiration of 3 years of ceasing to become an independent director.

What is sub-prime crisis?

Sub-prime lending stands for lending to borrowers not qualifying for the best rated standards i.e. they are not prime borrowers. To componsate for the possible loss, banks charge higher rates from them.

Is Happiness and Pleasure one and the same thing?

Human Beings attain happiness by adopting a certain attitude consciously or otherwise. Bliss is the supreme form of satisfaction that only a rare enlighten soul experiences. It is said that happiness is not your destiny but a consciously made choice; one has to first accept inevitable like suffering and death and tackle the vagaries of life with a positive attitude. One must drive all anxiety out of his mind; a person can do this as he is himself responsible for placing anxiety in the mind.

What are values? Why is the need for values and value system in life?

Values are to set a particular benchmark. It is an ethical framework where under which the Company’s decisions are taken. Ethics are concerned with the code of value and principles that enable a person to choose between  right and wrong, and therefore, select the right from alternate courses of action. One’s end might be noble; and one might want to reach the right place where no one put fault claims. But if one abandons the highway of value and takes the shortcut of expediency and compromise, one might not get there in the shape intended by him. One might not get to the applause of those waiting to receive at the finish line. Legitimate means takes one certainly towards the desired goal. Not so legitimate goals end up tripping one by the wayside. One cannot legislate for good conduct and for honesty. Values can create a culture that can withstand all turbulence and temptations. Values can be likened to a strong anchor for a ship that goes through rough weather and raging storms of business.

  1. ‘Value’ is the quality of something that renders respect, esteem and prize.
  2. According to Webster, “Value is a principle, standard or quality regarded as worthwhile or desirable.
  3. Value describes thing’s worth, desirability, usefulness or quality.
  4. Widely accepted Value as per traditional philosophy is Truth, Goodness and Beauty (Satyam Shivam Sundram)
  5. Various Indian school of thought have conveyed variety of meanings to ‘Values’.

What is the need for value?

  1. Human Excellence can be attained only when Heart, Hand and Head work in coordination with each other. There will be completeness in growth and development of individuals.
  2. Since Vedic times, the overall trend of intellectual transactions was based on religious philosophy, thoughts and ideas which were predominantly value-oriented.
  3. Value or moral education formed an intrinsic part of education and the learners observed the prescribed code of conduct throughout their lives.

Kabir says: “ suniye gunn ki vartaa, avgunn lijiye nahi, hans ksheer ko gahat hai, neer tiyagi so jahin.”

Explain in details various sources of acquiring values by an individual?

Values are as important in life as food to live for a man. Dimensions of human development and role in terms of their sources are physical, intellectual, moral, spiritual, family, society, national.

They can be:

  1. Cultural
  2. Regional
  3. Constitutional

What are the constitutions of value?

  1. Values are at the core of heart and these are a strong force affecting behaviour.
  2. Values are judgmental in nature
  3. Values have both content and intensity attributes
  4. Values are dynamic, not static always
  5. Many values are relatively stable and enduring
  6. People may have separate hierarchy of values forming their values system.

What are the types of values?

  1. Temporal: Cultural, political, Economical, Social, Corporate
  2. Universal: Human, Moral, Spiritual

The CEO’s experience conflicting demands made upon by various groups. Customers want prices to be down, employees want their salary up, vendors want their prices up, the government wants more and more taxes, and the society wants something good for the public good.  One should have the thought that we owe it to the society and are committed to add value to our social responsibility initiative.

What is a Company? What are it’s characteristics?

It is a congregation of various talk holders such as customers, employees, investors, vendors, partners, government and the society. A corporation should be fair and transparent to its stakeholders in all its transactions.  This has become imperative in today’s globalised business world where corporations need to access global pool of capital, need to attract and retain the best human capital from various parts of the world, need to partner with venders on mega collaborations and need to live in harmony with the community. Unless, Company embraces and demonstrates ethical conduct, it will not be able to succeed.

Explain how ethics is an integral part of business

Use of Resources: Society bestows upon businesses, the authority town and use land and natural resources. In return, In return, society has the right to expect that productive organization (i.e. business enterprises) will cater to the general interests of consumers employees and community.

Fairness: Society may also expect that business enterprises honour existing rights and limit their activities within the bounds of justice, equity and fairness.

Implied Contract: All productive enterprises can be viewed as engaging in an implied contract with the Society. So, under this “social contract” between society and business, the behaviour of business enterprises is guided by “Business Ethics”. Corporate governance: in the process of corporate decision – making, managers contribute, consciously or unconsciously to the shaping of human society – it is not a choice between profits and ethics, but profits in an ethical manner. This has lead to the evolution of “corporate governance”.

Explain the concept of corporate code of conduct.

  1. Code of conduct refers to, “a set of conventional principles and expectations that are considered binding on any person who is a member of a particular group.”
  2. A code of conduct creates a set of rules for specified circumstances that become a standard for all who participate in the group and represent themselves outside of the group.

What is Security and Exchange Board Of India (SEBI)?

The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992. The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as:

“…to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto”

Write a note on Corporate Governance

Corporate Governance can be defined as a set of systems and processes which ensures that a company is managed in the best interest of all its stakeholders. When one talks of Stakeholders, it does not essentially mean a shareholder. A company typically has five stakeholders, namely, the employees, the shareholders, the customers, the creditors and the community. The Other actors who also play an important role in Corporate Governance are the CEO and the Board of Directors.
Business author Gabrielle O’Donovan defines Corporate Governance as “an internal system encompassing policies, processes, and people, which serve the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity, accountability and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a health board culture which safeguards policies and processes”.
What is registerar of company (ROC)?

Explain in details the account system of share transaction?

How can you explain preference shares?

What is Demat account?

How can you explain arbitration? 

A mechanism for resolving disputes between investors and brokers, or between brokers. Arbitration is overseen by the Financial Industry Regulatory Authority (FINRA) and the decisions are final and binding.

How can you explain depository?Different type of deposits accepted by bank are mainly of following types: of 

  1. Saving deposit
  2.  Current deposit
  3.  Fixed deposit
  4. Recurringde posit 
  5. Deposits under various deposit schemes like deposits from retiring Govt. employees, public sector employees etc. There are two types of depositories:
  • National Security Depository Limited (NDSL): This is an organisation, which is an intermediary between the Registrar and the company for dematerialisation of shares. It is associated with National Stock Exchange. The NSDL was promoted by some giant institutions like:
  1. IDBI Bank
  2. UTI
  3. NSE
  • Central Security Depositories Limited (CDSL): A CSD is an entity which provides a central point for depositing financial instruments (‘securities’), for example bonds and shares. CSDs’ clients are typically financial institutions themselves (such as custodian banks and rather than individual investors. It is associated with Bombay Stock Exchange. The CDSL was also promoted by some solid institutions like:
  1. Bombay Stock Exchange
  2. Bank of Baroda
  3. Bank of India
  4. HDFC Bank

How can you explain Corporate Governance?Corporate governance encompasses commitment to values and to ethical business conduct to maximise share-holder value on a sustainable basis while ensuring fairness to all stakeholders including customers, employees, investors, vendors, the government and the society at large.

What is business ethics?

Business ethics refers to the application of the ethical principles to business. It is a specialised study of moral wrong and right as they apply to institutions, business policies and behaviour. It is also defined as the art of discipline of applying ethical principles to solve complex moral dilemmas. There is never a separate ethics of business nor is it needed, as be it a city manager or a college dean no-one ceases to be a human being first. In real life we see numerous people who have a habit of cheating, stealing and lying or taking bribes in their business lives. Such problem can be addressed through adoption of moral values, moral education of individuals, of the family or the school. 

Business ethics the application of moral values to business behaviour. It is relevant to every aspect:

  1. Boardroom strategies
  2. How company treats its customer, employee, other stake holders
  3. Accounting practises
  4. Disclosure Norms

Ethic goes beyond the legal requirements. It covers the conduct of individuals as well as the organisation. It is how company carries out its business.

Explains the needs & significance of corporate governance and what are the essential for the good corporate governance?

The Cadbury committee “the system by which companies are directed and control.” According to ICAI “A corporate governance system is its imbedded configuration of values ethics and appropriate and expected behaviour which provide the coordinates for the organisation performance of its role as societal entity in all its aspect . A code of corporate governance makes explicit both the auditable and the desire aspect of such a configuration.

For the changing ownership structure Social Responsibility.

  1. Need of globalisation
  2. Protection from the scams
  3. Essence for good corporate governance Integrity
  4. Accountability & Responsibility
  5. True & Fairness

What are the objectives of corporate governance? 

How money corrupts behaviour?

There was a student names as Raghunath. He ran a small shop in a small town. He was in content with his earnings and his frugal living. He was religious in outlook and compassionate towards others. One afternoon, when it was raining a poor old vender named Satyadas, came to his shop. He was running high temperature. Raghunath provided him food and shelter. In morning also the visitor was provided with hospitality. He left for his destination, leaving behind a pouch of 6 gold coins and a ring studded with gems. Raghunath waited for him for several months for him to return, then on the persuasion from his wife he sold the content of the by one by one. He set up a big shop and built up a big house to live in. Satyadas came back. Raghunath was shocked. He was not hospital now as he was before. On the contrary he thought the devil had arrived and wished for him to leave at the earliest. As Satyadas, was about to leave, conscientious Raghunath asked him, “Did you leave something behind when you came last time?’

Satyadas said,”I do not know, God knows everything.”

Three aspects of a single-minded:

  1. Morality
  2. Greed
  3. Guilt

When one gets money, tastes the power of it he becomes corrupt.

What is Harshad Mehta scam?

In the early 1990s, during the height of Harshad Mehta scam, 10 percent was giving advice on what should be the next investment in. 99% of it was fake or rumoured. Some people working in financial department of companies who had the knowledge of what was going on were passing that information on. It was not just about banking or financial sector but the whole society having the information and mis-using it. Confidential information should be communicated on it the need-to-know purpose. Chinese walls or fire walls are very important for multi-business investment banks. How one takes the disciplinary sanction is very important. The person spreading information should be immediately asked to leave the company with no two-questions. Any security glitch can cause loss of millions of money.

What is listing?

Listing means formal admission of a security to the trading platform of Exchange. The ASX listing rules are:

  1. All investors have equal and timely access to material information concerning the company such as its financial situation, performance, ownership and governance.
  2. Company announcements are factual and presented in a clear and a balanced way. “Balance” requires disclosure of both positive and negative information.

The listing fees depend on the companies paid up capital at both NSE and BSE. While the initial listing fee at NSE is Rs.7,500, it is Rs.20,000 at BSE.

What is Demat Account?

It is the dematerialisation account. Shares come in material (certificates). It allows physical access to the account. Re-materialization, i.e. entry into the physical strength. It is done by depositories. In Demat account, one can:

  1. Trade F&O (intraday and overnight/positional).
  2. Trade Currency.
  3. Trade Equity (intraday and delivery).
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What is Union Trust of India Act?

What is Manipal University Jaipur Act, 2010?

What is OECD (Organisation for Economic Corporation and Development)?

What is Indian Financial Reporting Standards (IFRS)?

International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international.

What is International Accounting Financial Service (IAFS)?

Satyam’s failure

What is Company Act, 1956

It is an artificial body created by law. Company means group of people associated together for the attainment of common end, social or economic.Company should be formed and registered under this act or of an existing company. Characteristics:

  1. Separate legal entity: It is an entity separate from it’s members. It has independent corporate existence. Any of its member can land into a contract with it in the same manner as any individual can and he cannot be held liable for the acts of the company even if he holds virtually the entire share capital. The company’s money and property belongs to it and not to the shareholders (although the share-holders own the company).
  2. Limited liability: Company can be limited by guarantee and by shares.
  3. Perpetual succession: A company never dies nor does its life depends on the members.It continues to exist even if all its members are dead. The existence of company can only be terminated by law.
  4. Common seal: It acts as the official signature of the company.
  5. Transfer of shares: Capital of company is divided into shares.These shares are freely transferable so that no share-holder is permanently wedded to the Company.
  6. Separate property: As a company is a legal person distinct from its member it is capable of owning, enjoying and disposing off property in its own name.Although capitals and assists are contributed by share-holders, they are not the private or joint-owners of the company.

What is IPO?

An initial public offering, or IPO, is the first sale of stock by a company to the public. A company can raise money by issuing either debt or equity. If the company has never issued equity to the public, it’s known as an IPO.
Companies fall into two broad categories:

  1. Private: Fewer shareholders and its owners don’t have to disclose much information about the company.Anybody can go out and incorporate a company (just put in some money, file the right legal documents and follow the reporting rules of your jurisdiction). Most small businesses are privately held. But large companies can be private too.IKEA, Domino’s Pizza and Hallmark Cards are privately held.Not possible to buy shares in a private company.One can approach the owners about investing, but they’re not obligated to sell anything.
  2. Public: Sold at least a portion of themselves to the public and trade on a stock exchange.Thousands of shareholdersSubject to strict rules and regulations.Must have a board of directorsMust report financial information every quarter.

What is liquidity?

Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price. Market liquidity refers to the extent to which a market, such as a country’s stock market or a city’s real estate market, allows assets to be bought and sold at stable prices. Cash is the most liquid asset, while real estate, fine art and collectibles are all relatively illiquid. Accounting liquidity measures the ease with which an individual or company can meet their financial obligations with the liquid assets available to them.

What is Demutualisation?

Stock exchange were associated with Brokers. Due to non-transparency, virtual platforms were given where just stocks are dealt with. The broker sends the contract notes electronically and confirmation by mail should be avoided.

What are the different types of bank account?

The different types of accounts linked to Bank Account:

  1. Personal Accounts: It’s related to individual, Firm, Company, or an institution. Real Account: these account related to those entire thing whose value can be measured in the terms of money and those are the properties of the business.
  2. Nominal Account: These accounts related to income and expenses.
  3. Trading account: It shows the result of buying and selling of goods during the given period of time and its prepared for calculating the gross profit and gross losses.
  4. P&L account: Calculate the net profit or net loss of an undertaking of a certain period .In the beginning gross profit is recorded in the Cr. Side and Gross losses in the Dr. of the P&L account. Then all the income and expenses are recorded.

What is ROC in stock-marketing?

The Rate-of-Change (ROC) indicator, which is also referred to as simply Momentum, is a pure momentum oscillator that measures the percent change in price from one period to the next. The ROC calculation compares the current price with the price “n” periods ago.

How did ICICI get its recognition with New York Stock Exchange?

In 1955, seven years since India had become independent, it was also the time to rebuild the nation and industrialisation was the only way forward. It was at this time that with the initiative of the World Bank and the Indian government, that the Industrial Credit and Investment Corporation of India, ICICI, was formed. By the end of the 1990s, Kamath had chalked out ambitious plans to spruce up ICICI from within. Supported by an able group of young aspirants who believed ICICI had places to go. In 1997, ICICI became the first Indian financial institution to go online. At a time when word was experiencing the dot-com boom, Kamath was quick to sense the shift in customer demands. In September 1999, within three years of taking over as the Managing Director and CEO of ICICI, KV Kamath drew up aggressive plans for growth. That year, ICICI Ltd got listed on the New York Stock Exchange, NYSE, the first ever Indian financial institution to go the American Depositary Receipts, ADR route. Fighting skeptics, Kamath went ahead with a plan to offer a multi-channel delivery system to its customers. Starting with just 5,000 online customers, ICICI today serves over 2.5 million people online. It opened the floodgates of a unique success story.

What is Transition+2 days?

It means Trade plus 2 business days in today’s market. When one buys or sells shares through the broker and contracts to exchange the legal ownership of those financial products for money. This exchange is called settlement.

What is square-off?

When money has reached the dealers and the deal is confirmed. Squaring off is a trading style used by investors/traders mostly in day trading, in which a trader buys or sells a particular quantity of an asset (mostly stocks) and later in the day reverses the transaction, in the hope of earning a profit (price difference net of broker charges and tax). It includes:

  1. Intraday Trading, so no over night risk. Average only 8 -10 trades in a month.
  2. Sometimes you would witness continues losses if the algo doesn’t sync with the market.
  3. If the triggered trades are right, it can make 10 to 15% in just one day.
  4. Even in worst case scenario, after all transaction costs, the current Bank Nifty algorithm would end up making +50% at the end of year.

What is Shareholder’s safety law?

The rights and power one can hold as a shareholder are:

  1. Passing resolutions at shareholder meetings
  2. voting-out directors
  3. Electing to sell their shares
  4. Exercising minority buy-out rights (this is where dissenting shareholders require the
  5. Company to buy their shares: the right can give significant protection to disaffected
  6. Shareholders wanting to sell and preserve their capital)
  7. Requesting the company in writing to provide information held by the company (with a right to appeal to the court if the company refuses) requiring the company to provide the shareholder with a statement of the shares that he or she holds, and of the various rights, privileges, conditions and limitations that attach to those shares.

Certain decisions about the running of the company cannot be made without shareholders participating. These include:

  1. Various decisions requiring the unanimous assent of shareholders
  2. Alterations to the constitution
  3. Alterations to shareholders’ rights
  4. Decisions involving major transactions
  5. Decisions involving remuneration and other benefits.

The rights of shareholders are:

  1. Being communicated efficiently by the Company’s empowerment.
  2. Giving them ready access to balanced and understandable information about the company and corporate proposals.
  3. Making them easy for them to participate in general meetings.

What was the Kingfisher Scam?

Kingfisher owes Rs 9,091.4 crore, including interest, to 17 banks as on November 30, 2015, according to a statement made by Arun Jaitley in Parliament on Thursday. Mallya and his companies have come under the scanner of multiple investigative agencies in the country. The CBI is investigating Kingfisher for defaulting on a Rs 900-crore loan from IDBI Bank. The Enforcement Directorate has registered a case against Mallya for alleged money laundering. Mallya is currently fighting at least 22 cases in various courts related to loan default by Kingfisher Airlines. At least three banks – United Bank of India, State Bank of India and Punjab National Bank — have declared Kingfisher Airlines, United Breweries (Holdings) and Mallya as “wilful defaulters”.

Raksha: It means protection, n the corporate scenario it can be equated with the risk management aspect. It talks about the protection of the stockholders for which a separate committee can be formed which may check the CG practices.

What do you mean by Corporate Social Responsibility?

It refer’s to the organisations duty to look after all its stakeholders as opposed to just the shareholders. Traditionally, it was often seen as a burden to the company but now it is often seen as  source of opportunity for improvement in company’s reputation.It often involves  Stakeholders Need Analysis whereby organisation identify their key stakeholders and what their needs are.

What is candle subsidey?


What the value of enterprise?