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Satyam Scam

  • Date Submitted: 07/29/2011 01:05 PM
  • Flesch-Kincaid Score: 53.4 
  • Words: 1459
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CORPORATE GOVERNANCE FAILURE AT SATYAM

India has seen corporate scandals in the past, but never one of this magnitude. A software company, touted as a success story, the 4th largest software company in India and one that services around 1/3rd of the Fortune 500 companies, the events of the past one month have been a total shock. They have called into question the entire range of issues related to ethics, corporate governance, fiduciary responsibilities, professional auditing, and so on. There will be a lot more soul-searching that will happen, a lot more inspection and suspicion of other companies, search for more skeletons in the cupboard, and so on.
Mr. Raju brought forward. Starting from the surprise news about Satyam trying to buyout the realty companies, Maytas (run by Mr. Raju’s sons), this is almost like a film story. The news about Satyam using its huge estimated surplus of more than $1.2 billion to buy companies related to the promoter (especially when the promoter held only 8% shareholding in the company) was a huge blow to all norms of corporate governance and met with huge resistance. Seeing this resistance, the company decided to roll back this proposal, but things would not stop from that point onward.

The issue kept on snow-balling, and when a popular issue comes up in the press, they can push at all areas and get more secrets out. So, questions started being asked about respected board members such as Vinod Dham as to whether they asked the right questions and acted in the interests of the shareholders. Other news started disclosing that actually the promoters had already pledged all their shares and effectively could be actually holding no stake in the company. And then the World Bank announced that in continuance of an earlier investigation, Satyam has been found to have a great many security problems with their last work (including probable sniffer tools and a data hole), and hence Satyam has been banned from further World Bank contracts....

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