 We are looking at the different theories of corporate governance and now we are going to move a little bit forward beyond the cost transaction theory and we will be talking about the hazard model theory. In our previous cost transaction theory, we basically look at the fact that there is a lot of opportunistic behaviour within the organisation and also within society which is reflected in most of our actions, in our attitudes, in our behaviour and in our different dealings and it is very important that through rules and regulations and through legal mechanisms, we are able to impede or obstruct or discourage the opportunistic approach of individuals and corporations. Now, when we are going to be talking about the hazard theory, then again we are talking about the morality challenges and the morality complexities within an individual and within an organisation. Now, when we will be moving towards this particular model, then we will be seeing in essence what it tends to encapsulate that managers are prone to moral hazard and opportunistic behaviour guided by their own interests. So, this is what I basically was talking about that again as a human, we have this tendency that we have these moral hazards. Now, what is a moral hazard? A moral hazard is that when we are talking about morality, then morality is the distinction between what is right and wrong but then there is another question that what is right, let us say in one community is wrong in the other. For example, if we talk about international communities, then alcohol drinking is allowed in many countries of the world but in Islamic states alcohol is prohibited. So, therefore, over there it would be right and over here it would be wrong and when we go across the border then alcohol is a part of the religion also. So, actually it is encouraged. So, we are seeing that it is the same thing but in one community it is considered to be in another it is considered to be a religious right and in another we see that it is absolutely prohibited. So, when we are talking about these different moralities then there comes to be a certain confusion or a certain thin line which tends to create a confusion and chaos within organisations and also within individuals and also within communities. Now similarly, if we look at even our own country of Pakistan then many a times we see that there could be ways of dressing differently. So, in one community the dressing is done in one way, in another one it is done another way, third one it is done another way and therefore the right and wrong of dressing, of demeanour, of body language, of behaviour, of interfacing between different communities of the respect between the old and the young of hierarchies which tend to exist. They all have a moral texture which is actually a hazard because sometimes it becomes so difficult to understand. I will just give you another example that in Islam one of the most fundamental things is that if we come across anyone then it is important that we greet the person with As-Salaam-Alaikum and that is the minimum that we should be greeting the person and in our religion it is considered that the person should do it first. So, again rather than waiting for the other person to greet or say As-Salaam-Alaikum and we say Waalaikum As-Salaam but in our society I have personally conducted a survey in which it was it was enumerated in which it was identified that in our society there are 22 different ways of saying As-Salaam. So, depending upon the situation we are modifying our way of doing As-Salaam and the question is why this is a moral hazard because it then tends to represent a very chaotic and very complex a very complexity infused mind and why do we do that? Another example, you can see that in our religion we say that Sufainiswe Maan hai, the claniness is half of the religion but look around. Look around how much of garbage how we tend to throw things outside of the window or how we tend to throw things while we are on a motorbike or how we try to throw things when we are on a car or while we are walking. So, there is trash all around. Why? What is this Sufain? Look at institutions. We see dustpins, there is lesser trash in the dustbin, more outside. Are we playing basketball? Look at our own homes. We don't even keep them clean. The question is why? Why do we have this moral trepitude? And these are different moral hazards that we say something and we do something else and that basically means that there is a disconnect between thought and action. And that is why there is this very famous saying that be careful of your thoughts. Your thoughts become your words. Your words become your actions. Your actions if done repeatedly become your habit and if your habit continues for a long time then it becomes a part of your character and you don't even understand that you are doing something wrong and your character becomes an indicator of your destiny. So, this whole moral trepitude and all of these hazards are a part of life but it is very important that for the betterment of humanity, for the betterment of community, for the betterment of organizations, we understand this hazard moral theory and this hazard model theory which tends to make us understand that managers or people are prone to moral hazard and opportunist behavior. Now, when we talk about opportunist behavior, then we talk about self-aggrandizement, that we are only concerned with our own betterment. We are only concerned with our own affluence. We are only concerned for our own power, authority, remuneration, benefits and everything. But why? But why? Why are we focused towards self-only? When all good theories say that we are a part of society, we have to be empathetic, we have to be considerate, we have to be flexible, we have to be tolerant, we have to be sympathetic, we have to be concerned, we have to be compassionate, we have to be equitable, we have to understand the needs of others and try to have a direction in which we fulfill our needs but also try to cater to the needs of other people. So, this hazard is there that we tend to blindfold our own eyes, our own mind, our own lives and by blindfolding it, we basically start treading on the black path towards hoarding, towards self-fulfillment, towards self-aggrandizement. And the question is ladies and gentlemen, why? We are guided by our own interests but it does not mean that my freedom should tread upon the freedom of someone else. My freedom has to end where the freedom of someone else's begin. My needs have to be curtailed where the needs of other people are being compromised. We cannot move without self-deceptive, without self-regulation, without understanding of others and that ladies and gentlemen is the hazard model theory. These are hazards that we create within ourselves and in that creation we tend to confuse our own needs and our own want. Very brilliantly written in the book of Dr. Clayton Christensen and his book is, How do I measure my quality of life? What are we trying to run after? What are we trying to achieve? Does it lead to our happiness? Does it lead to our fulfillment? Does it lead to solace and peace? Does it lead to peace of mind? Does it lead to contentment? Or are we just being swayed? Swayed by materialism, swayed by the propensity of materialistic desires, of superficiality, of itemization, of wanting to have more, but gaining nothing out of it, compromising our relationships, compromising our different solitudes. That is extremely important ladies and gentlemen. So moving a little bit ahead, the theory of moral hazard is central within agency theory and also refers to hidden actions or opportunistic behavior of managers and that is what I was saying. Therefore, these hidden actions arise as a consequence of asymmetric information held by the counterparts and opportunistic actions occur by human inclination. So again, just like I was elaborating that we have to identify all of this and by identifying it understand that we are not going to tread on a path which will compromise others and would only lead to our own self-aggrandizement and this asymmetric information can be used in a negative context and then we can create structures which basically again lead to my benefit only at the cost of others and again the question is why? So this hazard model theory actually does not give answers. Actually, it gives questions. It gives questions that why is it that a few individuals or one individual wants to have everything at the cost of others and that is the biggest hazard. Going forward, we see the way of expressing the moral hazard may result in the manager's remuneration policy and in the use of various actions such as handling financial communication. So as earlier said in the other theories, what is happening is that through information we are holding information and based upon that holding we are creating opportunities only for ourselves and not for the employees, not for the shareholders and not for the stakeholders but self only and therefore compromising on the whole context of corporate governance and the betterment of all. So that is extremely important that the hazard theory is strongly connected to the different policies which lead to the benefits of its managers. That has to be curtailed and that has to be looked at and that has to be reviewed and the board has to play a major part that the managers or the top management do not tend to horde the resources of the organization for their only benefit and that is a hazard and that is morality being questioned. Thank you so much ladies and gentlemen.