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    Group 1 - Section C - Satyam CG

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    ramcnarayan
    Raju inflated Satyam's financial records over several years to mislead investors and regulators about the company's actual financial performance. In January 2009, Raju confessed to fraudulently overstating Satyam's cash balances, revenues, and profits. This led to a collapse in Satyam's share price and widespread reputational damage for the Indian IT industry. In response, the Indian government replaced Satyam's board and new governance policies were introduced, including stricter rules around auditor oversight, director independence, and separation of the CEO and chairman roles.

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    Group 1 - Section C - Satyam CG

    Uploaded by

    ramcnarayan
    46 views8 pages
    Raju inflated Satyam's financial records over several years to mislead investors and regulators about the company's actual financial performance. In January 2009, Raju confessed to fraudulently overstating Satyam's cash balances, revenues, and profits. This led to a collapse in Satyam's share price and widespread reputational damage for the Indian IT industry. In response, the Indian government replaced Satyam's board and new governance policies were introduced, including stricter rules around auditor oversight, director independence, and separation of the CEO and chairman roles.

    Original Description:

    Satyam Corporate Governance Issues

    Original Title

    Group 1_Section C_Satyam CG

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    Raju inflated Satyam's financial records over several years to mislead investors and regulators about the company's actual financial performance. In January 2009, Raju confessed to fraudulently overstating Satyam's cash balances, revenues, and profits. This led to a collapse in Satyam's share price and widespread reputational damage for the Indian IT industry. In response, the Indian government replaced Satyam's board and new governance policies were introduced, including stricter rules around auditor oversight, director independence, and separation of the CEO and chairman roles.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    46 views8 pages

    Group 1 - Section C - Satyam CG

    Uploaded by

    ramcnarayan
    Raju inflated Satyam's financial records over several years to mislead investors and regulators about the company's actual financial performance. In January 2009, Raju confessed to fraudulently overstating Satyam's cash balances, revenues, and profits. This led to a collapse in Satyam's share price and widespread reputational damage for the Indian IT industry. In response, the Indian government replaced Satyam's board and new governance policies were introduced, including stricter rules around auditor oversight, director independence, and separation of the CEO and chairman roles.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 8

    Corporate

    Governance Failure
    at Satyam
    PRATEEK | RAM | SAKSHI | SIRISHA | VARUN | VISHNU
    SECTION C GROUP 1

    History of Satyam
    1987

    Incorporated as private limited company with 20 employees

    1991

    IPO in the Bombay Stock Exchange (oversubscribed by 17 times)

    1999

    Global presence in 30 countries. First Indian company listed on NASDAQ

    2000

    Associate count reaches 10,000. Receives National HRD award from Indian
    Government. Revenue reaches USD 1 billion

    2005

    Satyam was ranked 3rd in Corporate Governance Survey by Global


    Institutional Investors

    2007

    Raju awarded E&Y Entrepreneur of the Year. Official IT services provider of


    FIFA World Cups 2010 and 2014.

    2008

    Revenue surpasses USD 2 billion. Portfolio of services to around 690 clients


    including 185 of Fortune 500

    Satyams downfall with Maytas


    Maytas Group founded in 1988 headed by sons, Tejas Raju and Rama Raju Jr.
    Using influential political contacts, acquired Indian govt. projects
    Raju inflated and cash bank balances in Satyams financial records
    Several years of manipulation
    Misleading cash and bank balances of 5,361cr (actual 321cr)
    Non-existent interest of 376 earned on the bank balance
    Understated liability of 1,230cr
    Overstated debtors position of 2,651cr (actual - 490cr)
    Operating margin of Q2 FY09 shown as 24% as against 3% of revenue
    Inflated size of workforce by 25% to 50,000 and siphoned off wages to the tune of
    19.2cr every month

    Tried to cover up by acquiring control in Maytas for USD 1.6bn (effectively no


    exchange of cash)

    Scam revealed
    19 Dec
    2008

    Registrar orders probe for violation of corporate governance in


    acquiring Maytas

    23 Dec
    2008

    World Bank blacklists Satyam for 8 years for data theft and bribing
    allegations

    29 Dec
    2008

    7 Jan
    2009

    5 independent board of directors resign


    Raju confesses to years of manipulation and fraud and resigns.
    Share prices plunge by 78%

    It was like riding a tiger, not knowing how to get off without being eaten. B. Ramalinga Raju

    Satyam Scam: Fallouts


    Independent directors had been considered as
    promoters men often friends and family
    were nominated
    Core team of Satyams
    employees in Singapore
    broke away and try to lure
    existing clients
    Mandatory disclosure
    of pledging of shares
    by controlling
    shareholders

    Credibility of
    international audit
    firms brought under
    question

    Big client US-based State Farm Insurance


    Company announces termination of
    services
    Two PwC partners
    arrested and PwC
    replaced by KPMG
    and Deloitte

    Indian Companies
    Act found deficient
    for regulations
    regarding
    appointment of
    Independent
    Directors

    Rigorous checks by
    clients to check
    ownership structure
    and review due
    diligence before
    outsourcing

    ...its not really Satyam at stake; its the India Inc. brand.

    Remedial Action
    Satyams board sacked and six new Independent Directors
    appointed by the govt
    Land used as collateral to pay salaries and working capital
    requirements
    Two pronged strategy 1) retain existing clients 2) maintain
    relationship with employees and management
    Legal tenders floated for bidding process to identify a new buyer
    51% takeover by Tech Mahindra for USD 585 million
    According to The Higgs report, non-executive directors should
    question intelligently, debate constructively, challenge rigorously
    and decide passionately.

    Corporate Governance issues


    The Satyam scam had been the example for following poor CG practices
    failed to show good relation with the shareholders and employees
    CG issue at Satyam arose because of non-fulfilment of obligation of the
    company towards the various stakeholders
    distinguishing the roles of board and management
    separation of the roles of the CEO and chairman
    appointment to the board
    directors and executive compensation
    protection of shareholders rights and their executives

    Thank You.

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