How shares of companies have reacted to poor governance standards?

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Corporate governance deals with conducting the affairs of a company such that there is fairness to all stakeholders and that its actions benefit the greatest number of stakeholders.

Here are few companies whose corporate governance were questioned and how shares have reacted since then.

DLF

DLF has been in the news on many occassions. Equity Research firm Veritas called the company a "crumbling edifice" questioning accounting practices. Arvind Kejriwal last month revealed a nexus between DLF and Sonia Gandhi's son-in-law Robert Vadra. Earlier, hundreds of home buyers in DLF's project in Chennai collectively moved the Competition Commission of India (CCI) accusing the company of extracting additional money under the garb of taxes. 
Shares of DLF slipped more than 4% to Rs 223 on the Kejriwal allegation. The shares of the company have fallen ever since.

IRB

Ideal Road Builders is one of the leading road infrastructure players in India. IRB was in the spotlight once again after reports of the company's relation with BJP chief Nitin Gadkari. It is alleged that IRB had invested Rs 1.85 crore and provided loan of Rs 1.65 core to the Gadkari-promoted Purti group. Earlier, IRB promoter and chairman Virendra Mhaiskar took a polygraph test for his alleged role in a murder and successfully cleared it.
Shares witnessed a downtrend following the news even after the company clarified on stock exchanges. Shares hit a new low recently of Rs 113 following the allegations.

Educomp

The Economic Times reported that according to Espirito Santo analysts, Soumitra Chatterjee and Nitin Padmanaban, documents show that the address for EduSmart's auditor - Sanjay Rastogi & Associates - is the same as that of the firm, potentially jeopardising auditor independence. They also questioned other accounting practices of the company.

Shares of the company reacted and fell to new low in May to Rs 123

 

Coal India

The Children's Investment Fund (TCI) filed a case against Coal India and the government over its investment in the company.
TCI was unhappy with the corporate governance standards at Coal India. TCI is a minority shareholder in Coal India and believed that the company has violated corporate governance standards by selling Coal at rates that were much lower than the market rates.
As per the complaint filed against the directors of CIL, the company has failed to perform its functions with adequate care and skill and also breached the fiduciary duties.

The share of Coal India slipped more than 2% at Rs 334 on that particular day.

 

Read more about: dlf, irb, coal india, educomp
Story first published: Wednesday, November 7, 2012, 9:46 [IST]
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