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    Satyam CSR

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    vinit_shah90
    Satyam was one of India's largest IT companies that employed over 53,000 people. In 2009, it was discovered that the company's accounts had been fabricated for many years by inflating cash and bank balances, understating liabilities, and overstating receivables. This resulted in the resignation of the company's chairman and losses for shareholders. In response, the government appointed a new board and CEO for Satyam. Subsequently, Tech Mahindra acquired a majority stake in Satyam as part of its diversification strategy.

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    Satyam CSR

    Uploaded by

    vinit_shah90
    370 views30 pages
    Satyam was one of India's largest IT companies that employed over 53,000 people. In 2009, it was discovered that the company's accounts had been fabricated for many years by inflating cash and bank balances, understating liabilities, and overstating receivables. This resulted in the resignation of the company's chairman and losses for shareholders. In response, the government appointed a new board and CEO for Satyam. Subsequently, Tech Mahindra acquired a majority stake in Satyam as part of its diversification strategy.

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    Satyam was one of India's largest IT companies that employed over 53,000 people. In 2009, it was discovered that the company's accounts had been fabricated for many years by inflating cash and bank balances, understating liabilities, and overstating receivables. This resulted in the resignation of the company's chairman and losses for shareholders. In response, the government appointed a new board and CEO for Satyam. Subsequently, Tech Mahindra acquired a majority stake in Satyam as part of its diversification strategy.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    370 views30 pages

    Satyam CSR

    Uploaded by

    vinit_shah90
    Satyam was one of India's largest IT companies that employed over 53,000 people. In 2009, it was discovered that the company's accounts had been fabricated for many years by inflating cash and bank balances, understating liabilities, and overstating receivables. This resulted in the resignation of the company's chairman and losses for shareholders. In response, the government appointed a new board and CEO for Satyam. Subsequently, Tech Mahindra acquired a majority stake in Satyam as part of its diversification strategy.

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    Satyam Saga

    Satyam  First IT Company in the World


    • Set up in the year 1987 to provide Certified under ISO9001:2000
     Ranked Among India’s Top 10
    services in IT sector
    Best Employers, 2004 and 2003
     Top 13 Best-Managed Companies
    • India’s 4th biggest software company in in India
    India  Winner, Corporate Citizen I
    award for Corporate Social
    Responsibility
    • It is listed in BSE, NSE, NYSE and Euro  SAP Pinnacle Award 2008 
    next (Amsterdam).  Satyam Won golden peacock
    award for excellence in Corporate
    Governance on Global level for 2nd
    • BSE IPO oversubscribed 17 times when time
    made public in 1991  United Kingdom Trade and
    Investment India Business Award for
    Corporate Social Responsibility
    • The company employs 53,000 IT
    professionals across development
    centers in 6 continents
     Chairman and founder Satyam
    Computers Services Limited

     Winner of Ernst & Young entrepreneur


    of the year award in 2007
    B. Ramalinga Raju
    Founder & Chairman, Satyam Computers
    Ltd.

     He became the Managing Director


    and Chief Executive Officer in 1991

     Before 1997, he was with Maytas Infra


    Limited as one of its Directors
    B. Rama Raju
    Promoter & CEO, Satyam Computers Ltd.
    Satyam Decade at a Glance
    Fabricated Income Statements

    • Details of cash balances with Scheduled banks are not there in the
    Annual report

    • Question raised by Equity analyst Kawaljeet Saluja -$500 mn cash


    parked in current account
    5,040 + 376 + Rs. 1,230 Cr
    Rs. 7,136
    470 (Rs. Cr)
    Cr
    Understated Liabilities
    Fraud Amount
    Overstated cash
    balances, Income
    receivables
    Slippery Slope to Disaster

    December’08 brought news of pending litigation by a former client, online mobile-


    payments service Upaid Systems which filed a case of intellectual fraud and forgery
    against Satyam in 2007

    World Bank banned Satyam from doing any of its work after it found Satyam
    employees had hacked into its system and gained access to sensitive information
     It also did not renew their five-year contract

    On Dec. 16, when Raju announced the company would spend $1.3 billion to buy
    Maytas only to reverse the decision a few hours later under shareholder pressure
     Satyam ADRs lost 50% of their value overnight
    Satyam
    Dec-2008 to Jan-2009
    Causes of the problem
    Problems created

    Negligence of fiduciary duties, maintenance of ethical standards and

    CSR in attempt of covering up for accounting gap created by cooking up financial

    books over the years


    Causes of the problem
    – Power of greed overshadowed the responsibility to meet fiduciary duties.
    – Low ethical and moral standing of the top management.

    – External factors are fierce competition and the need to impress the investor,

    analyst, shareholder, and stock market


    – The other lacuna in the modern financial world is lack of human touch.

    – More focus on short term gains


    Analysis of the Causes of the Problem

    o Greed for money is not the only greed:

    Greed for power, competition, success, prestige (as Mr Raju did


    in many accolades and awards) may compelled the highly
    educated man to work unethically which resulted in violation of
    fiduciary duties by the executive and independent directors of the
    company.
    Analysis of the Causes of the Problem
    o Low ethical and moral standards as they involved in following :

    – Fudging Numbers: Pumped up revenue, profit, bank deposits, and cash


    reserve numbers.

    – Undisclosed pledges: Procured a loan of Rs.1230 crores without


    disclosure

    – Insider trading: Sold most of his 26% stake while tweaking numbers to
    keep share price high.

    – Take Over code: Probable violation if he knew when his stake fell
    below 5%
    Analysis of the Causes of the Problem
    • Satyam had incurred the loan of Rs 1230 crores from various
    sources so they were under a pressure to show rosy picture of a
    company otherwise creditors would have been skeptical.

    • Satyam did focus on the short term gains rather than long term
    However, the deal was called off.
    strategies to flourish the company thereby engaging in cooking up
    the accounting books

    • And then without consideration of shareholders in order to rectify


    the gap made an attempt to buy share in sister concern Maytas for
    $1.3 billion which was although granted by board but shareholders
    experienced an objective conflict of interest.
    In the News..
    Marketing
    Aspect
    Of
    Satyam Saga
    Satyam Clients
    A total of 650+ Clients
    185 of the top fortune 500 Companies
    Satyam, which specializes in business software and offers back-office
    outsourcing and consulting, had very high profile clients & counts
    General Electric, Nestle, Qantas and Fujitsu among its major customers.

    But with skeletons coming out of the closet, during the scam customers were
    unlikely to renew contracts when they came up for review, analysts said.

    As a result of the SCAM


    Satyam was foreseen losing some of its clients to MNC’s such
    as IBM, HP and Accenture.
    GE, the largest client for Satyam, was
    learnt to be evaluating options of
    inducting the Satyam team working
    on its IT project & a source familiar
    with the matter said talks are on with
    other outsourcing vendors.

    Satyam's bigger rival Tata


    Consultancy Services (TCS) was
    considered & also provided services to
    GE. 
    Nestle, the world's largest food
    company, has been a Satyam
    client since 2004.

    In 2007, it extended its


    engagement with the Indian IT
    firm for another three years,
    landing it a new multi-million
    dollar contract.
    Clients were looking out – and so were the
    employees

    And companies were fine with clients


    approaching them, but had a moral issue if
    employees approached them? 

    How fair is that?


    H.R Aspect
    of
    Satyam
    Saga
    • It was nights and heartburns for the over 53,000 employees of Satyam
    Employees
    Computers as they conjured up worst case scenarios
    like non-payment of salaries, project cancellations , layoffs and
    equally bleak prospects outside.

    • As the company's management tried to reassure shocked employees,


    jobs sites had got flooded with resumes of hundreds of Satyam
    employees.

    • Job consultants believed that in the current economic climate , Satyam


    employees might have to settle for lower salaries outside.

    It was an Employers' Market


    The question here is ????????
    Everybody wants Satyam clients, but not employees?

    Well, if you take the head out, tail will follow – if Satyam
    clients move away, employees will ( have to) quit – and
    thanks to all these ‘we won’t take you’ slogans, these
    employees were available for cheap.
    ? ?? ?
    n es s
    f a ir
    s t h e
    e re i
    W h
    This is where one has to respect a company like Wipro
    which made it clear that they will treat Satyam employees as any
    other candidate and will evaluate them on same scale – i.e. be fair
    to clients as well as employees.

    And Wipro stated, 


    Respect Talent – that’s what grows an industry, especially in
    these times when one is looking forward to mature action from the
    industry.
    Each company said to itself.

    We applaud government for taking quick


    action in setting up the board (and restoring
    confidence on Indian IT industry) – now it was
    time to ask Satyam competitors to go easy on
    their mouth.
    After the Scam
    New CEO and
    AFTER THEspecial
    SCAM…advisors

    - On 5 February 2009, the six-member board appointed by the Government of


    India named A. S. Murthy as the new CEO of the firm with immediate effect.

    - Murthy, an electrical engineer, has been with Satyam since January 1994 and
    was heading the Global Delivery Section before being appointed as CEO of the
    company.

    - The two-day-long board meeting also appointed Homi Khusrokhan (formerly


    with Tata Chemicals) and Partho Datta, a Chartered Accountant as special
    advisors
    Acquisition by Mahindra
    Group

    • On 13th April 2009, via a formal public


    auction process, a 46% stake in Satyam
    was purchased by Mahindra & Mahindra
    owned company Tech Mahindra, as part
    of its diversification strategy.

    • Effective July 2009, Satyam rebranded its


    services under the new Mahindra
    management as "Mahindra Satyam" with
    a new corporate website
    www.MahindraSatyam.com.

    • C.P Gurnani is the current CEO.


    Restatement of Results

    As a result of the scandal, under the directions of the new


    Mahindra management team, Satyam Computer Services
    restated its financial results for the period 2002 to 2008.

    These restated results were published in September 2009.

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