Stakeholders are individuals or groups who have a vested interest in the success

Question

Stakeholders are individuals or groups who have a vested interest in the success of a company. In order to properly service its stakeholders, companies have a responsibility to keep the stakeholders informed, provide transparency, and protect the financial well-being of the organization. Select a company, other than Enron, that is of interest to you that failed to uphold its responsibility to stakeholders. Consider the responsibility to stakeholders when it comes to financial reporting as well as social responsibility.

With these thoughts in mind:

Give an example of a company that failed to uphold its responsibility to stakeholders and explain how. Explain the implications of this failure on stakeholders.

Readings:

http://www.ifac.org/system/files/downloads/5.2-IFAC-Interview-Euleen-Goh-Bringing-Financial-Reporting-Stakeholders-Together-FINAL.pdf

https://class.waldenu.edu/bbcswebdav/institution/USW1/201660_02/MS_ACCT/ACCT_6620_ACMG_6620/Week%202/Resources/Colemen(2011).pdf

Explanation / Answer

An IT major company of India is taken as an example that was found guilty of financial irregularities of many types in the year 2008-09. The company also neglected the interest of stakeholders during their process of the wrongdoings.
The company had been found to involve in following irregularities:
1.   Building a base of fictitious employees and siphoning of funds in the name of such employee base.
2.   Manipulation of financial data to show the company a profitable venture in the eyes of stakeholders
3.   Lack of transparency in operation and not following disclosure norms set by SEBI
4.   Insider trading by some of the top level employees
5.   Investment in assets with doubtful background
6.   Lack of corporate governance
Above are some of the painters of financial scam posed by the company that not only cheated common shareholders, employees, regularity authorities, but also, it puts the reputation of Indian IT industry at stakes in the world.
Here, the company failed to fulfill their responsibilities because stakeholders in the form of employees, vendors, common shareholders and regulatory bodies are cheated. There were not made aware of the issues and their interest were neglected for the sake of the personal benefit of the few.
As a result, the owner of this company is in Jail and severe penal action is taken against him and his chief allies. But, in a broader spectrum, such scams make negative impacts upon consumer and investor confidence. Capital market also suffers. It also happened with this company. Stocks were trading at a price less than that of a burger.
Stakeholders suffer through loss of jobs, mental agony, loss of investment, loss of business and regularity authorities are also doubted regarding the effectiveness of their policies. It leads to the next level of reform so that such scams are prevented in the future.

Name of the company cannot be disclosed due to copyright and related reasons.

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