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Corporate Governance Concern in Emerging Markets

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1. What is the controversy surrounding Flex Industries? Discuss the chain of events.
2. (a) What are the roles and responsibilities of different stakeholders? Analyze their behavior with respect to the Flex incident.
(b) What has been the role of the market during and after the controversy? What is the theory behind the market reaction?
(c) Who has more disciplining power in corporate governance — the market, the media or the government?
3. From the case discussions what according to you is the key corporate governance concern in emerging markets?

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Solution Summary

This posting gives you a step-by-step explanation of unethical business practices in emerging markets. The response also contains the sources used.

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Step 1
1. What is the controversy surrounding Flex Industries? Discuss the chain of events.
The controversy surrounding Flex industries is that the company has paid a bribe to government officials for evading the payment of excise duties. The chain of events are that an entrepreneur industrialist Ashok Chaturvedi, the owner of Flex group of companies and the chief excise commissioner Someshwar Mishra were arrested by the Central Bureau of Investigation after it recovered $12,500 from Mishra's office and $12,500 from his car. This event occurred in November 2001. In May 2004, the court exonerated both Chaturvedi and Mishra because of lack of evidence. The other controversies that surfaced during investigation were the possibility of Chaturvedi supplying material for election campaign for the then finance minister of India in 1999. Another controversy that emerged during investigation was that Chaturvedi had financed three parties for the then governor of Jharkhand. The governor was forced to resign from his post. The controversy is that there are bribery charges. ...

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