Case: Infosys vs Satyam. Whose wealth is maximized?
The case revolves around the accounts manipulation of Satyam Computers. It makes a comparison between two companies of the same competitive IT industry i.e Infosys and Satyam Computers. It shows how the company’s fate/ business scenario depends upon the financial vision of the CFO. The principal objective of the case is to analyze the role of a CFO in maximising shareholders’ wealth. The main objective of every company is shareholders’ wealth maximization. In order to achieve this objective, any decision of the companies will be taken keeping it aligned with the interests of the shareholders. Both Infosys and Satyam’s Corporate Governance speaks of what the individual company values. In case of Infosys, the company believes to maximize shareholders’ wealth retaining stakeholders’ trust with performance integrity. However, Satyam’s Corporate Governance revolves around delighting the stakeholders ie. Investors, Customers, Associates and Society. Infosys is the India’s second largest software company and Satyam is the fourth largest software company in India. Both the companies are in the same IT industry. However, in one case the shareholders’ wealth is maximized and in other it’s destructed. When compared between the CFO’s of both the companies, we can see that in one the vision of the CFO has moved the company to higher heights and in the other it has failed to gain the trust of the shareholders because of its fraudulent ways. Also, the case has shown emphasis on the principal-agent relationship between the management and the shareholders of the company. The case study compares the way shareholders’ wealth was managed at Infosys and Satyam over years and to debate on the role of CFO on maximising shareholders’ value.
2. Identification of core issues, Facts of core issues:
a. Infosys: Story of Wealth Maximisation:
i. Management of Infosys valued...