'Corporate Governance failures manifested in Ranbaxy Laboratories Board's failure to Check fraud, absence of the adequate risk management system and unethical practices.' Discuss how the above factors have affected compa

Ranbaxy Laboratories (Ranbaxy), had gone from a rising star to troubled company as a result of corporate governance failure manifested in its Board's failure to check fraud, absence of risk management system and unethical practices. As per reports, "Ranbaxy had been on a fast track when it started supplying generic drugs to the developed countries. Issues with FDA in the U.S. came to light in 2006, but Ranbaxy's compliance and quality problems had remained under the surface for several years." As per reports, "Ranbaxy also perpetrated fraud on shareholders by exposing their investment to huge reputation and compliance risks by fuzzing data submitted to regulators." Further, as reported, "Ranbaxy, also committed fraud on consumers, hospitals, value chain partners and common people who took pride that Ranbaxy had emerged as the first Indian multinational in the pharmaceutical sector." If reports are to be believed, "disputes flared between the company and the US Food and Drug Administration, and evidence emerged that Ranbaxy had been systematically gaming tests and failing to meet health standards." Thereafter, in 2013, the Ranbaxy settled with the US Justice Department and pled guilty to felony charges and had to shell out $500 million in fines." In one of the article, an author noted following important facts, "Everyone expected corporate governance of highest order with the illustrious Board and significant foreign and institutional shareholding, however the reality was different. The company was fined $500 million. The US department of justice said the company had "pleaded guilty today to felony charges relating to the manufacture of certain adulterated drugs". Felony is a serious criminal charge. By accepting to pay a criminal fine and forfeiture and agreeing to settle civil claims, Ranbaxy may have succeeded in effecting damage control. That does not, however, mitigate the seriousness of its actions." In 2008, Japanese pharmaceutical giant, Daiichi Sankyo, bought the jewel of India's generic medicines industry, Ranbaxy Laboratories. However, as per reports, in 2013, "Daiichi Sankyo declared that information about the US investigations had been withheld from it when it bought the company and took the Singh brothers to arbitration in Singapore". Later in 2014, Daiichi Sankyo sold Ranbaxy to Sun Pharmaceuticals. It has been stated that adverse ruling by Courts, compounded the problems, resulting in severe liquidity pressures, triggered unanticipated defaults with banks and lenders. As reported in news reports, Bottle of Lies by Katherine Eban, reveals, Ranbaxy's "success" was based on deceit. "In its race for profit, Ranbaxy had lied to regulators, falsified data and endangered patient safety in every country where it sold drugs". In one of the reports, an author stated that there is a "similarity in the fraud at Satyam and the same at Ranbaxy. In both cases, the top management overrode the internal control system." Highlighting the role of Independent Directors, it has been noted that "Independent director's responsibility is limited to ensuring that he/she understands the business model, best corporate governances practices (e.g. board process, risk management system, internal audit and statutory audit, whistle-blower policy, and transparency within and outside the Board) are in place and operating effectively, analysing information available through the Board processes or otherwise and acting proactively based on that analysis for the benefit of the company as a whole. If independent directors are held responsible for frauds perpetrated by or with the support of the top management, which has the ability to override internal controls, it will be difficult to induce professionals to join Boards of companies as independent directors."