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Satyam Computers Corporate Governance Fiasco (A): Siblings Are Dearer Than Shareholders?


Code : GOV0033

Year :

Industry : Business Law, Governance and Ethics

Region : India

Teaching Note: Available

Structured Assignment : Available

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Introduction: Probably, Ramalinga Raju was reflecting on the realities behind the scene without actually disclosing the facts when he said, “...this would de-risk the core business...” The deep turmoil that engulfed India’s fourth-largest consulting and Information Technology (IT) services provider, Satyam Computer Services Ltd. (Satyam) could not be understood even by the greatest observers of the market. Even the industry pundits did not attempt to look deeply into the baffling conditions faced by the CEO. Everyone in themainstream massmedia, investors, shareholders andmarket observers concentrated only on one issue – Satyam’s announcement of its board’s decision to invest/acquire a management stake of 51% in Maytas Infra Ltd. and 100% in Maytas Properties Ltd. on December 16th 2008. Nobody even thought of or attempted to find out what could be the main risk to the ‘core-business’.

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With high expectations that the board’s unanimous decision would be accepted by all the investors and shareholders, Ramalinga Raju confidently announced on December 16th 2008, the board’s approval of the acquisition of two Hyderabad-based Maytas (S A T Y A M spelt reverse) firms. Satyam intended to diversify its operations by entering into non-IT segments like energy, transportation and infrastructure by acquiring the two Maytas firms...

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