Corporate Governance & Business Ethics Case Study

Satyam Computers Corporate Governance Fiasco (C): CEO Confesses, Company Collapses

Abstract:
Third in the Satyam Computers’ Corporate Governance Fiasco case study series, this case study captures the events that occurred between January 7th 2009 and January 10th 2009. On January 7th 2009, very surprisingly the CEO, B. Ramalinga Raju released a press statement confessing that the books of accounts were tampered with and the income figures in the last few years were inflated. More interesting, rather amusing, was his admission that no one else was involved in this entire episode and taking the onerous responsibility on himself. And this confession triggered off a series of events resulting in the arrest of B. Ramalinga Raju on January 10th 2009.

Debacle at Satyam Computers proved that the rewards, recognition and accolades for following the best practices in corporate governance by themselves are not ultimate proof of corporate governance principles being practiced in letter and spirit. However, one question remains unanswerable. When the CEO assumes the entire responsibility in a corporate governance fiasco absolving everyone else (family members, board of directors, independent directors and other top management people), how should the regulatory authorities and the government proceed against the CEO who has confessed and other people who were absolved by him. As The Economist observed, “when a liar confesses, can you believe him?”

Pedagogical Objectives:

The case attempts to achieve the following pedagogical objectives:
• To have an overview of the events concerning the (un)holy deal between Satyam and Maytas and the resultant eruption of Satyam's corporate governance fiasco
• To examine, critically evaluate and debate on the CEO’s confession letter, especially from the point of view of absolving all the others including the top management, board of directors and the family members, from any of the accumulated corporate wrongdoings
• To have an understanding of the events leading up to the arrest of Satyam’s CEO, Ramalinga Raju and debate on the expected fallout of his arrest
• To examine and suggest all the possible options (in the light of the CEO’s arrest), before:
• The company and its top management;
• The regulatory authorities; and
• The government.

Keywords : Satyam Computer Service, Corporate Governance, Satyam, Maytas Deal, Role of Independent Directors, Shareholder Activism, Corporate Frauds in India, CEO Confession, Ramalinga Raju, Maytas