Corporate Governance & Business Ethics Case Study

Satyam Computers Corporate Governance Fiasco (B): The Role of Independent Directors

Abstract:
Second in the series of Satyam Computers Corporate Governance Fiasco, this case study inquires, if the fiduciary duties of independent directors on Satyam board were duly discharged. This case enables a debate on whether the independent directors have deviated from the spirit of the corporate governance norms, particularly in a company that is renowned for receiving the Golden Peacock Award for Excellence in Corporate Governance more than once.

The independent directors are expected to function on behalf of the shareholders and investors to protect their interests. Their duties fall under two broad categories: the duty of loyalty to the shareholders and the duty of taking utmost care in approving any proposals of the management of a firm. Had the independent directors not derelict the true spirit of their fiduciary duty, Satyam Computer Services Ltd. would not have got into the turmoil. Thanks to the Shareholder activism, without which the biggest corporate governance fiasco in India would not have had surfaced even till date. It raises several doubts over the role of the Board of Directors and the integrity of independent directors on the Satyam Board. Satyam is really the hardest case for India in the known times, but one should not forget the well-known legal phrase, “Hard cases make bad law”. Satyam’s case highlights the need of the hour to make corporate governance laws more effective to achieve more transparency and accountability to prevent the repetition of unfavourable events in the corporate houses of India.

Pedagogical Objectives:

The case attempts to achieve the following pedagogical objectives:
• To understand the relevance and the importance for the companies to adhere to corporate governance norms
• To understand the roles and responsibilities of independent directors in the functioning of any corporate Board
• To delve and debate on the circumstances leading to Satyam Computer Services Ltd. corporate governance fiasco
• To examine and critically evaluate the role of independent directors in Satyam Computer Services Ltd. corporate governance fiasco.

Keywords : Corporate Governance, Satyam Computer Services, Shareholder Activism, Satyam, Maytas Deal, Role of Independent Directors, Corporate Frauds in India, Ramalinga Raju, Mergers and Acquisitions, Business Diversification, Maytas Infra, Maytas Properties, Investors’ Activism