Corporate Governance Issues at Satyam Computers


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:

Case Code : BECG094 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Corporate Governance / Controversies
Case Length : 18 Pages
Period : 2008-2009
Pub Date : 2009
Teaching Note : Not Available
Organization : Satyam Computer Services Ltd.
Industry : Information Technology/ Software Services
Countries : India

Abstract:

The case examines the corporate governance issues at the India based IT services company, Satyam Computer Services Limited (Satyam). In mid-December 2008, Satyam announced acquisition of two companies - Maytas Properties and Maytas Infrastructure owned by the family members of Satyam's founder and Chairman Ramalinga Raju (Raju). Due to adverse reaction from institutional investors and the stock markets, the deal was withdrawn within 12 hours. Questions were raised on the corporate governance practices of Satyam with analysts and investors questioning the company's board on the reasons for giving consent for the acquisition as it was a related party transaction.

After the deal was aborted, four of the prominent independent directors resigned from the board of the company. In early January 2009, Raju revealed that the revenue and profit figures of Satyam had been inflated for past several years. The revelation further deepened concerns about poor corporate governance practices at the company. The case describes the corporate governance structure at Satyam, its code of conduct, roles and responsibilities of different committees under the board, whistle blower policy etc. It highlights the role played by the independent directors of Satyam in approving the Maytas deal and discusses their limitations.

Issues:

Study the corporate governance structure that existed at Satyam Computers.

Appreciate the importance of Code of Conduct and Whistleblower policy of a company.

Examine the roles and responsibilities of a company's board and independent directors.

Critically analyze the instances where the independent directors failed to fulfill their responsibilities.

Understand the limitations of independent directors in Satyam's case.

Contents:

  Page No.
Introduction 1
Background Note 2
Governance Practices at Satyam 3
The Maytas Fiasco 6
Raju Confesses to Accounting Irregularities 8
What was the Board Doing? 9
The Board's Limitations 10
The Aftermath 9
Exhibits 13

Keywords:

Satyam Computers, Corporate Governance, Maytas, Maytas Infra, Maytas Properties, Independent Directors, Ramalinga Raju, Board of Directors, Accounting Fraud, Acquisition, Golden Peacock Global Award, Audit Committee, Compensation Committee, Whistleblower Policy, Code of Conduct , India's Enron

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