Corporate governance is concerned with the structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organization. It has become an increasingly important issue for organizations for three main reasons. The separation of ownership and management control of organizations (which is now the norm except with very small businesses) means that most organizations operate within a hierarchy, or chain, of governance. This chain represents those groups that influence an organization through their involvement in either ownership or management of an organization. Increased accountability to wider stakeholder interests has also come to be increasingly advocated; in particular the argument that corporations need to be more visibly accountable and/or responsive, not only to ‘owners’ and ‘managers’ in the governance chain but to wider social interest Corporate scandals since the late 1990s have increased public debate about how different parties in the governance chain should interact and influence each other. Most notable here is the relationship between shareholders and the boards of businesses, but an equivalent issue in the public sector is the relationship between government or public funding bodies and public sector organizations. As the key purpose of Corporate governance drive the benefit of shareholder of the company all members of corporate governance model responsible and accountable for driving this primary objective. 1.1 Five Golden Rules of Corporate Governance
And best corporate governance practice is not simply about a battle between distant, disloyal institutional shareholders and greedy directors but about the ethos of the organization and fulfilling its clearly agreed goals. 5 golden rules of Corporate Governance of successful organization are: 1. Ethics: a clearly ethical basis to the business
2. Align Business Goals: appropriate goals, arrived at through the creation of a suitable stakeholder decision making model 3. Strategic management: an effective strategy process which incorporates stakeholder value 4. Organization: an organization suitably structured to effect good corporate governance 5. Reporting: reporting systems structured to provide transparency and accountability 2 Objectives of study
Objective of this case study is to understand and critically examine flaws, failure of Corporate Governance on Satyam Computer’s strategic decisions. Also analyze what are the areas those can be influenced by proper Corporate Governance. This case also helps understanding Governments roles to tackle firms or intervene in firm’s functionality in the interest of internal and external stakeholders. Not only were there failures at the regulatory level, but also at the executive level. With no express code for corporate governance in India, the company failed to follow the industry standard best practices and as a result, collapsed. This study would be useful in identifying the different kind of failures in a family owned business like Satyam and to policy makers in designing and implementing corporate governance frameworks for professionally managed as well as family managed businesses like Satyam. This case also reveals how wrong decisions can damage entire organization and dent the image of company. This case also focuses certain legal issues related to roles and responsibilities of Chairman and other top management including critical role of independent directors of organization. This Case Study focuses laws and gaps in the Indian context. 3 Historical Evolution of the company
Satyam was incorporated on June 24, 1987 as a private limited company providing software development and consulting services based out of Hyderabad, Andhra Pradesh. Ramalinga Raju and his brother Rama Raju were the promoters of the company. Before starting Satyam these duo were involved in other businesses like construction and textiles. This company was started with 20 employees...