 "Corporate irregularities can impact economy at large: Justice Kumar")
Financial misconduct and corporate irregularities can impact the economy at large and come at the expense of shareholders and banks, cautioned Justice PS Dinesh Kumar, presiding officer of the Securities Appellate Tribunal (SAT), on Thursday.
Speaking on corporate governance at a session by Excellence Enablers, Justice Kumar called for good governance and ethics from directors and chief experience officers of the companies.
“Corporate irregularities not only diminish shareholder value but it impacts on the economy at large. The financial frauds mostly come at the expense of company shareholders, and the lenders such as banks, and ultimately the retail depositors of the banks,” said Justice Kumar.
Justice Kumar added that regular audits and proper disclosures are important to avoid instances of bad corporate governance which may lead to the breakdown of the company.
“The concept of corporate governance is built on four guiding principles — people, purpose, process, and performance...it is not enough for the company to be profitable, but also to demonstrate good corporate governance, ethical behaviour and other sound practices,” said Justice Kumar.
He further added that while regulatory action is needed to enhance trust and adherence to law, it can significantly impact negatively on the stock prices, depending on the severity of the charges.