Crony Capitalism and Corporate Fraud

 APRIL 4, 2013 Thursday 

Corporate Fraud Loves Company ( and how Crony Capitalism works ) 

Companies where the top four executives are appointees of the current CEO are about 35% more likely to engage in fraud—and about 20% less likely to get caught—than firms in which none of the top four are the present CEO's hires, says a team led by Vikramaditya S. Khanna of the University of Michigan law school.

 It takes teamwork to commit fraud and keep it hidden, the researchers suggest.

Source: CEOs with Close Ties to Top Executives More Likely to Commit Fraud

Courtesy : Harvard Business School. 

Tail Piece : Our Guru Mr Virmani sir used to say in his classes " USA and the West has ' Spoil System'. If a CEO changes, he fires entire management team in the company and brings his own team . If he is unable to ' deliver goods' as per share holder's expectations, it his his head which will roll first . 

Where as in India and in Asia in general, a leader has to perform with the given team, in a given situation , not much leeway . " 

So, Amdaani is sitting on a bubble, created by his buddy , Mome Dee ! It can go bust at any time .