Corporate Governance Failure at Satyam

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ACRC: CORPRORATE GOVERNANCE FAILURE AT SATYAM 1. What are the reasons for the inadequate corporate governance at Satyam? The fall of Satyam can be attributed to many causes as mentioned below: * Raju had been manipulating Satyam’s financial books for a period of seven years and the major corporate governance issue was that the Board of Directors and the auditors were unable to catch hold of the issue for so long. * Raju and his family founded a group of companies called Maytas. It was owned by his sons and to ensure billion dollar targets for Maytas, Raju inflated cash and bank balances in Satyam’s financial records. * He acquired 6800 acres of land property by pledging promoter shares and raising funds. * To hide the deceit in Satyam’s books, Raju decided to acquire a controlling stake in Maytas infrastructure and properties. This deal was strongly criticised by the shareholders. However few members of the BOD agreed to this deal as they were not aware of the consequences of such an act. 2. What are the implications of this failure for Satyam? There were various consequences that had to be faced by Satyam which impacted its very existence. * Satyam was blacklisted by the World Bank for a period of eight years on grounds of data theft and bribing bank officials. * Consequently, five independent directors resigned from the board, shortly after the announcement of the Maytas acquisition. * In 2009, the share price of Satyam fell to an all time low of 78 %. * Satyam’s employees faced a bleak future as they were not assured of salaries in 2009. * Ultimately, the company ceased to exist on its own and was taken over by Tech Mahindra. 3. What is the role of independent and non-executive board members? Independent & Non-Executive board members are those members who do not participate in the day to day activities of a

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