Demutualisation refers to the legal structure of an exchange whereby the ownership, the management and the trading rights at the exchange are segregated from one another.

Demutualization is the process by which a customer-owned mutual organization (mutual) or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, members of a mutual usually receive a “windfall” payout, in the form of shares in the successor company, a cash payment, or a mixture of both. Mutualization or mutualisation is the opposite process, wherein a shareholder-owned company is converted into a mutual organization, typically through takeover by an existing mutual organization.

The mutual traditionally raises capital from its customer members in order to provide services to them (for example building societies, where members’ savings enable the provision of mortgages to members). It redistributes some profits to its members. By contrast a joint stock company raises capital from its shareholders and other financial sources in order to provide services to its customers, with profits or assets distributed to equity or debt investors. In a mutual organization, therefore, the legal roles of customer and owner are united in one form (“members”), whereas in the joint stock company the roles are distinct. This allows a broader capital base if the customers cannot or will not provide sufficient financing to the organization. However, a joint stock company must also try to maximize the return for its owners instead of only maximizing the return and customer services to its customers. This can lead to a decline in customer service to the extent that customers’, management’s and shareholders’ interests diverge.

Source: WIKIPEDIA & Others

 Business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment.

In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).

Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia, descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have re-branded their core values in the light of business ethical considerations (e.g. BP’s “beyond petroleum” environmental tilt).

The term CSR came in to common use in the early 1970s, after many multinational corporations formed, although it was seldom abbreviated. The term stakeholder, meaning those on whom an organization’s activities have an impact, was used to describe corporate owners beyond shareholders as a result of an influential book by R Freeman in 1984.

Whilst there is no recognized standard for CSR, public sector organizations (the United Nations for example) adhere to the Triple Bottom Line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities.

Source: WIKIPEDIA

Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or corporate social performance, is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure its adherence to law, ethical standards, and international norms. Business would embrace responsibility for the impact of their activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, business would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a triple bottom line: People, Planet, Profit.

The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others yet argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. Corporate Social Responsibility has been redefined throughout the years. However, it essentially is titled to aid to an organization’s mission as well as a guide to what the company stands for and will uphold to its consumers.

The SFIO is a multi-disciplinary organization under Ministry of Corporate Affairs, consisting of experts in the filed of accountancy, forensic auditing, law, information technology, investigation, company law, capital market and taxation for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds. The SFIO will normally take up for investigation only such cases, which are characterized by

• complexity and having inter-departmental and multi-disciplinary ramifications ;
• substantial involvement of public interest to be judged by size, either in terms of monetary misappropriation or in terms of persons affected, and; 
• the possibility of investigation leading to or contributing towards a clear improvement in systems, laws or procedures. The SFIO shall investigate serious cases of fraud received from Department of company Affairs.

For more details VISIT: http://www.sfio.nic.in

What does Section 302 stands for ?

Sarbanes Oxley Section 302 addresses all financial information disclosed to investors including MD&A in the 10Q and 10K.

Under SOX Section 302, CEO and CFO must:

Certify quarter and annual financial statements and other published financial information stating that they are fairly presented; no untrue facts or omissions;

Establish and maintain disclosure controls and procedures as of period end and for disclosing material changes in internal control;

Disclose to auditors and Audit Committee if control deficiencies, material weaknesses, or fraud exist.
 

What does Section 404 stands for ?

Section 404 is a subset of Section 302 and addresses Financial Statement Reporting controls.

Under 404, CEO and CFO must:

Certify Quarterly as to effectiveness of Internal Controls over Financial Reporting. Further, the Accounting Firm must Issue two opinions on internal controls over financial reporting: (1) Management’s assessment process and (2) effectiveness of controls.

Effective Year End 2004 CEO & CFO must include a report in the Annual Report indicating: They have designed and maintained a system of internal controls for financial reporting using a recognized internal control framework; They have tested internal controls and found them to be designed and operating effectively; The Auditor has evaluated the design and effectiveness of the controls and found them to be operating effectively.

Effective Q1 2005, CEO and CFO must certify quarterly that there are no significant changes to internal controls for financial reporting using a recognized internal control framework.

The Accounting Firm (External Auditor) must render two opinions:

Management’s Assessment Process;

Effectiveness of the company’s internal controls over financial reporting.

 The Accounting Firm must comply with Public Company Accounting Oversight Board (PCAOB) Audit Standards. 

In order to render opinions, The Accounting Firm may:

Review our process documentation;

Perform walk thru’s to validate controls are designed effectively;

Review and re-perform a sample of test of controls;

Perform additional independent tests;

Evaluate controls to ascertain if errors of importance could occur in the financial statements or if fraud could occur.