20. Corporate governance failure at Tyco
Early 2002,Tyco was alleged inviolation of theSecurities ExchangeActof 1934bynondisclosure ofmajor
financial information andartificially inflating itsearnings.OnJune17,2002, Tyco filed federal suitagainst
MarkH. Swartz,Tyco's former executivevicepresidentandchief corporate counsel,andFrank E.
Former chairmanand chiefexecutive DennisKozlowski andformer chieffinancial officer MarkH.Swartz were
accusedof thetheftof more thanUS$150million from thecompany.During theirtrial inMarch2004,they
contendedtheboard of directors authorized it ascompensation.
22. Impact of Corporate Governance on Business,
Society and the Economy
• Impact often refers to a
governance has long-term
impacts on society, the
economy, and the firm itself.
There are numerous
advantages to society and the
economy from good corporate
23. Some of the major impact of Corporate Governance on Business, Society and
Shareholders Confidence on Stock Price Appreciation
Business Growth and Development
Positive Public Perception of Business
Competitive Advantage of Business
Combating Corruption and Promoting Social Good
Positive Impact on the Economy
24. A) Shareholder confidence and stock price appreciation
• Confidentshareholdersarelikely toinvestlargeramountsofmoneyinaneffectivelygovernedcompanybecausea
• Thiscanleadtoimprovedmarketconfidenceinthecompany,whichcaneventually leadtostockpricerise.
25. B) Business Growth and Development
26. c)Positive Public Perception of Business
• Corporate governance procedures may affect how the public perceives a company or
organization, and occasionally the entire community.
• A business can earn a lot of public goodwill by having solid corporate governance
processes and rules including ethical sourcing, worker treatment, and environmental
• In a nation like Nepal where the general public opinion is not favorable, it is essential.
27. D) Competitive Advantage of Business
28. e) Combating corruption and promoting social good
• Good corporate governance may be extremely important to fight over corruption in
developing nations like Nepal where governments have limited resources, capacity,
expertise, and will to enforce tight regulations that restrict fraudulent acts by both
bureaucrats and business people.
• The chance of corruption may be significantly reduced when businesses have systems in
place that require transparency in all business transactions and complete disclosure of
accounting and auditing practices.
• In the long run, reducing corruption may benefit society in a variety of ways.
29. f) Positive impact on the economy