Satyam Computers Corporate Governance Fiasco (E): New CEO’s Known Problems, Unknown Solutions



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Code : GOV0039

Year :
2009

Industry : Business Law, Governance and Ethics

Region : India

Teaching Note: Available

Structured Assignment : Available

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Abstract: Fifth in the series of case studies on corporate governance fiasco at Satyam Computer Services Limited (Satyam), this case focuses on the series of events from February 6th to March 12th 2009. This case study is mainly intended to analyse the reasons that compelled the Indian government to abolish the ad hoc board of Satyam, which was formed at the behest of the former CEO Ramalinga Raju, and to form a new board with industry experts to carry on the day-to-day activities of the company. This case also helps in understanding the reasons behind selecting A.S. Murthy (Murthy), a much respected company veteran, as the CEO by the government-appointed board and enables a discussion on the challenges ahead of the new board and the new CEO in restructuring the company. Further, the case also helps in analysing the events that led the board to take a decision in favour of selling the controlling stake in the company and narrates all the events that occurred during the pre-bidding phase of Satyam.

In a decisive move to recover the company's blighted reputation, it was decided by the government-appointed interim board to sell the company through open bidding. The move, welcomed by regulators, was immediately followed by amendment of takeover rules by SEBI in an attempt to speed up the takeover process. Surprisingly, once the amendments were inked and the bid announced, many companies – foreign and domestic, and IT and non-IT – expressed their intent to buy the tainted company.

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Pedagogical Objectives:

  • To understand the events that forced the government to abolish the board of directors of Satyam Computer Services Limited (Satyam) and to appoint a new board as well as the events leading up to the appointment of a new CEO
  • To examine the factors that contributed to the appointment of A.S. Murthy as the new CEO for Satyam and to analyse the co-existence of two power hubs at the helm of the company
  • To discuss the challenges faced by the new CEO and to analyse the possible options available to him and the interim board over the dilemma – whether to sell off the company or to reconstruct it
  • To delve into the factors that contributed to the decision of the interim board to sell off the company and the steps taken by the government to make the bidding process smoother.

    Keywords :Satyam Computer Services; Corporate Governance; Satyam – Maytas Deal; Role of Independent Directors; Shareholder Activism; Corporate Frauds in India; Ramalinga Raju; Executive and Non-executive directors; Government Intervention; Tech Mahindra and Satyam Deal; Mahindra Satyam; Anand Mahindra; Mergers and Acquisitions

    Contents :
    » Confession Followed by Chaos
    » A Chariot without a Charioteer
    » New Charioteer Taking Up the Reins of a Tottering Chariot
    » Moving the Chariot Up and Down the Hill


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