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


Code : GOV0039

Year :

Industry : Business Law, Governance and Ethics

Region : India

Teaching Note: Available

Structured Assignment : Available

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Confession Followed by Chaos The confessional statement by the founder and CEOof Satyam, assuming complete responsibility for inflating the revenues, itself became a prima facie evidence for the government to take action against the perpetrators of the fraud at Satyam. However, the authenticity of the letter itself was not far from suspicions. Centralminister for CorporateAffairs, PremChand Gupta (Gupta), ordered the Registrar of Companies (RoC) on January 7th 2009 to probe into the ‘financial irregularities’ and tosubmit a report within a week, based on which he would refer the case to the Serious Fraud InvestigationOffice (SFIO)...

A Chariot without a Charioteer On January 11th 2009, the Indian government appointed a new three-member independent board for Satyam; in a positive move to boost investor confidence. This was despite the Company Law Board’s (CLB) permission to appoint a 10-member board. The Indian government placed three eminent people – Kiran Karnik (Karnik), C.Achuthan and Deepak Parekh (Parekh) – with Karnik as the head...

New Charioteer Taking Up the Reins of a Tottering Chariot As the idea of appointing a new CEO and a CFO was still in the planning stage, rumours over potential candidates lingered in the air. The six-member board of Satyamannounced its intention to decide thematter at the earliest possible time. Itwas reported that the board would also consider the bidding proposals in the wake of new relaxations offered by SEBI as well as a tie up with any bank to fund its immediate requirements...

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Moving the Chariot Up and Down the Hill Immediately after his appointment as the CEO,Murthy sent a videomessage to boost confidence in all Satyam employees. He tried to inspire them saying that it was not a big deal to thrive when economy was good and when the company had a number of customers. He added, “The company is down. But not out. It takes a very strong organisation, bonded by true culture and value-based management, to survive a crisis. It is true that we have suffered a blow. We have stabilised the organisation with regard to payroll.We nowhave secured the funding for timely deliveries and other working capital requirements...

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