Satyam Scandal

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Satyam Scandal|
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March 04, 2013|
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Satyam Scandal|
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March 04, 2013|

Abstract

The purpose of this report is to highlight the ethical issues involved, wrongdoings by the top management of the Satyam Computer services, and some ways adopted by government to prevent this type of fraud in the future. This scandal is a blot on the face of Indian corporate governance standards. It has proved that if there is corruption at the top, it’s bound to trickle down. The Satyam accounting scandal that rocked the country has proven once again that companies still have a lot to learn. It highlights two major corporate governance failures. First is the board ineffectiveness, when Satyam’s board approved of an acquisition of two companies, one of them unlisted and where Chairman’s family members were the majority shareholders. And second is the accounting shock, when it was disclosed that the firm had been fudging it’s accounts for several years and it’s much talked about $1.2 billion cash holding was largely non-existent and the result of a long-drawn accounting fraud. Prosecutors are pursuing cases against Satyam executives and auditor PricewaterhouseCoopers accountants. It is quite shocking that Mr. Raju was able to perpetrate a fraud of this magnitude in a public company for several years undetected. Along with his accomplices, Raju appears to have taken the advantage of the glaring weaknesses of corporate governance of the company. This scandal has also emphasized that all - investors, auditors, regulators, analysts – have to be vigilant when discharging the duties, since financial fraud can sometimes be hidden in overlooked parts of the financial statements.

Table of Contents

ABSTRACT1
INTRODUCTION3
IMPACT AND LESSONS LEARNED5
ETHICAL ISSUES INVOLVED6
ETHICAL DILEMMAS FACED BY RAMALINGA RAJU8
THEORIES AND APPROACHES THAT MAY BE USED TO RESOLVE DELIMMA9
RECOMMENDATIONS FOR RESOLVING THE DILEMMA12
RECOMMENDATIONS TO AVOID TRAGEDIES LIKE SATYAM IN THE FUTURE.13
CONCLUSION14
BIBLIOGRAPHY15

Introduction

“काममय एवायं पुरुष इति। 

स यथाकामो भवति तत्क्रतुर्भवति। 

यत्क्रतुर्भवति तत्कर्म कुरुते। 

यत्कर्म कुरुते तदभिसंपद्यते॥“

- Brihadaranyakopanishat 4.4.5 Meaning -
You are what your deep, driving desire is
As your desire is, so is your will
As your will is, so is your deed
As your deed is, so is your destiny (Sankrit quote for Chris Sigmon Patterson, 2010)

It all started on 24th June 1987 when a man called Ramalinga Raju established Satyam Computer Services. It started as a private limited company with just 20 employees for providing software development and consultancy services to large corporations. . There were many strides achieved by Satyam and soon there was no looking back. The period of 1997 to 2003 was a period of dream run for Satyam. Some of its achievements are -

* First Indian IT Company to get ITAA Certification for Y2K Solutions. * Satyam Infoway is the first Indian Internet company to be listed on NASDAQ. * Declared one of '100 Most Pioneering Technology Companies' by World Economic Forum, Davos in the year 2000. * First organization in the world to launch Customer-Oriented Global Organization training. * First ISO 9001:2000 Company in the world as certified by BVQI. * Ranked by the Brown-Wilson Group as the number two outsourcing vendor globally in the year 2006. (Satyam computer, 2007) Several honours were given to Mr. Raju for his contributions to Indian I.T industry. But in the company a storm was brewing up because of the several malpractices being followed by the top management along with it’s founders. Some of which are – * Share rigging.

*...
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