1. Covert Business Practices & Governance-B.V.Raghunandan, SVS College, Bantwal Poornapragna Institute of Management, Udupi February 22, 2011

2. Governance A corporate is an empire Many duty bound soldiers to protect it Political lobby in support openly or covertly Affects the lives of a huge size of people Employees, Customers, Suppliers, Dealers, Government, Service Providers like transportation, banking etc., environment and society at large

3. Covert Practices: Genesis Tax avoidance Initially, tax evasion was considered illegal and tax avoidance was immoral Later, tax avoidance became quite normal Consultancy started for tax planning and tax minimisation Separate set of annual reports: General and for tax purposes

4. Follow-up: Managerial Remuneration Promoters and managers were the same Expected remuneration was in the form of dividend on the capital invested For the fear of take-over, investment trusts were established to hold the shares of the group companies Managerial remuneration went up in order to build up the investment trusts

5. Emergence of Professional Managers Lack of belongingness due to hire and fire model of the USA Remuneration had a top-up with performance bonus Bonus was linked to sales initially Later was changed as a percentage of profit Board Room politics created uncertainty in the continuation of the manager Need to jack up the profit

6. Listed Corporates Quarterly reporting Benchmark performance Playing to gallery Frequent market access Emerging as a conglomerate Big fund investment Need to please the fund managers

7. Business Necessity Consumer movement Media exposure Innovation, Profitability, Productivity & Efficiency Government regulations Regulatory bodies like SEBI/SEC Creating a monopoly Meeting the competition Demand creation Creative accounting Managing HR

8. Creating Monopoly Tied Sale Market domination Industrial espionage Lobbying Whistle blowing NGO funding Accessory collaboration

9. Meeting the Competition Industrial Espionage Mergers and Acquisition Price Fixing Sub-Cost sale Marketing lies Illegal and immoral marketing practices Saturation advertisement

10. Demand Creation Multiplying the needs of the people Achieving repeat sales Creation of brand loyalty Unwanted warranties Planned decay Playing on emotions Creating need in a diabolical manner Trapping customers Encouraging fraudulent activities (general insurance claims)

11. Creative Accounting Quarterly reporting Before an IPO Post Listing of shares On the eve of Mergers & Acquisitions Raising funds externally Proving the smartness Usage of expensive accounting professionals (nexus between manager and auditor)

12. Managing HR Misleading cost to company Obtaining service bonds Quarantine of certificates Holding ESOPs Illogical project assignment Immoral TDS Sweet/double talk

13. Consumer Movement & Media Funding NGOs Misleading articles initiation Cultivating the media Vital data made insignificant Changing the formula of product Frequent changes in packaging

14. Innovation, Profitability, Productivity, Efficiency Unnecessary research and harmful process discovery Subsidising the quality and enhancing the looks Discovery of the usage of harmful chemicals and metals It is for cutting the cost and increasing the value Failure of regulatory agencies as the perpetrators are always one step ahead

15. Government Regulations Slow in reaction Always wait and watch Bureaucratic set-up Unmotivated personnel Less quality of HR Outdated laws One step behind the industry Corruption and lobbying

16. Regulatory Agencies New generation agencies do well RBI is an efficient, but old regulator financially independent Professionalism Full IT absorption Good system infrastructure Cronyism Adopting western practices blindly Inter-Regulatory rivalry Not focussed on objectives Impressed by the appearance than the content

17. THANK YOU