Ethics & Governance

June 7, 2012
Reebok Corporate Fraud..........

Another Satyam Scam is in the offing…..


When we discussed in detail the famous Satyam Scam in the class, I did promise you that one day I would post an article to highlight whether it was really the failure of Corporate Governance in India or due to some other causes. Before I get ready to pen down the article, I suddenly find in the Newspaper another corporate fraud which is very close to Satyam Scam, though of lesser magnitude which is another instance of poor managed Corporate Governance in India. The total impact of the Fraud of Satyam Scam is Rs. 20,000 crores and the new fraud in Reebok is alleged to be of Rs. 870 crores. 

The Adidas Group, the world’s 2nd largest Sporting goods company, had announced commercial irregularities of Rs. 870 Crores in Reebok’s India Business. They also filed an FIR with the Gurgaon Police Station, accusing the former CEO and COO of misappropriation of Funds, inventory diversion and fictitious inflation of sales revenue. Both CEO and COO are on the run 

The Government has initiated a probe into the role of Reebok India’s Auditors and the top management of Reebok in the Corporate Fraud of Rs. 870 Crores. The Government has already entrusted the investigation to the Serious Fraud Investigation Office (SFIO) to scrutinize the accounts of the Reebok and fix responsibility. The confidence of public and the Investors in various safe-guards built into the Corporate Governance mechanism like Independent Directors, Audit Committee, External Auditors, CEO Certification continues to be rudely shaken by yet another Corporate Fraud in Reebok. The Auditors of Reebok are silent on the Fraud. It’s impossible to think that how without the knowledge of External Auditors and Internal Auditors such huge misappropriation of funds can ever take place. 

The parent company, Adidas AG has hired the forensics team of KPMG to probe into the matter of Fraud which happened in 2010. 

I suggest my management students of mine to be on the alert both on ethics and governance of business. As I said in the past, the enforcement of the codified rules of Corporate Governance whether under the Companies Act or Clause 49 of the Listing agreement is extremely alarming in the Indian Corporate world. It’s is for the Professional Managers like you to realize this weakness in our governance system and do something to stem this rot. As I said in the past, no provision of law can imbibe ethics in your mind and ultimately it must come from within.

Prof. Ram Mallar.

© 2012
Mallarr Law Associates LLP
3, Silver Cascade, 110AA, Near Ruby Mills, Senapati Bapat
Marg, Dadar West. Mumbai 400 028.
Tel. No.: 2432 28413 (3 lines)
Email: mlc@mallarlaw.com.
Website: www.mallarlaw.com
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May 21, 2012

Corporate Governance  

COMMITTEE TO  FORMULATE POLICY DOCUMENT
 ON CORPORATE GOVERNANCE

The government of India in the month of March, 2012, has constituted a Committee to formulate policy document on Corporate Governance under the chairmanship of Mr.Adi Godrej, Ms. Zia Mody, Managing Partner of AZB Partners, is one of the many other members.

With the increasing complexities in the governance of business, Government felt that there is a need to have a formal document that synthesizes the desperate elements in diverse guidelines, draws on innovative best practices adopted by specific companies, incorporates the current international trends, and anticipates emerging demands on corporate governance.

The Committee is likely to elicit opinions from the public about the necessity of having a formal policy document on Corporate Governance and issue questionnaires and invite written comments through public advertisements and hold seminars for clarification of issues on the Corporate Governance.

This is to alert management students and professional managers to an opportunity for contributing to modern Corporate Governance by assisting the Committee headed by Mr. Adi Godrej.

Prof. Ram Mallar.

© 2012
Mallarr Law Associates LLP
3, Silver Cascade, 110AA, Near Ruby Mills, Senapati Bapat
Marg, Dadar West. Mumbai 400 028.
Tel. No.: 2432 28413 (3 lines)
Email: mlc@mallarlaw.com.
Website: www.mallarlaw.com


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HAND-OUT ON BUSINESS ETHICS & CORPORATE GOVERNANCE
ONLY FOR THE STUDENTS OF PROF. RAM MALLAR IN VARIOUS B-SCHOOLS.


You can download the above Hand-out from the following link:




  

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