Satam Scam Case Study

In December 2009, India faced its biggest challenge in the domain of corporate governance and ethics in the Satyam fiasco. The Satyam scandal shook the corporate India, and dented its standing with investors, both domestic and foreign. It turned out that founder and CEO B. Ramalinga Raju invented $ 1 billion in cash, which never existed. The Satyam scandal brought to attention the importance of ethics and its significance to corporate culture. The scam committed by the founders of Satyam is a proof to the fact that one’s conduct in a huge organization is influenced to a large extent by human greed, desire, and ambition for power, money, recognition and glory. Scandals like that of Enron to the recent financial crisis have time and again established
was formed in 1987 in Hyderabad, India by B. Ramalinga Raju. The firm began with 20 employees and grew rapidly as a global business, offering information technology and business process outsourcing services across sectors such as banking and financial services, energy, life sciences, utilities, diversified industrials, healthcare, manufacturing, aerospace, defense, public services, education, retail, travel and telecommunications. Satyam’s IT services businesses, by 2003, included 300 customers worldwide serviced by 13120 technical associates. The worldwide IT services market was estimated at nearly $400 billion, with CAGR of 6.4%.The markets major drivers were the increased significance of IT services to businesses worldwide, the influence of the internet on e-business, the rise of a high‐quality IT services industry in India and the increasing need of IT services providers who could offer a variety of
According to CBI, the Indian crime investigation agency, the fraud started when the planned to acquire a 51% percent stake in Maytas (maytas when spelled backwards is satyam!) Infrastructure for $300 million. The Raju brothers had a 37% stake. Raju’s also had a 35% share in an alternative real estate firm called Maytas Properties. On December 16, 2008, the Satyam board accepted the founder's suggestion to buy the stake in Maytas Infrastructure and all of Maytas Properties, which were possessed by family members of Satyam’s Chairman as a fully owned subsidiary for $1.6B. The directors went ahead with the management's decision without the approval of the shareholders. However, the decision was reversed twelve hours after investors sold Satyam's stock. The World Bank barred Satyam from conducting business for 8 years due to inappropriate payments to staff and inability to deliver evidence required on