Professional Documents
Culture Documents
A Study On The Corporate Governance Issues at SATYAM
A Study On The Corporate Governance Issues at SATYAM
CONTENTS
PARTICULARS
Introduction to Corporate Governance Relevance in the present Scenario Introduction to Satyam computers consultancy ltd Details of the case Importance & learning of the study
PAGE NO.
1-4 5 6-7 8-11
CORPORATE GOVERNANCE
Corporate Governance is typically perceived as dealing with problems that result from the separation of leadership & control.
Shareholder Board Managemen t Employees
DEFINITION:Corporate Governance may be defined as holding a balance between economic & social goals & between individual & commercial goals. A good corporate governance is one where a firm commits & adopts ethical practices across its entire value chain & in all of its dealing with a wide group of stakeholders encompassing employee, customer, venders, regulators & shareholders in both good and bad times.
Equitable treatment of shareholders: All the shareholders including minority and foreign shareholders should get equal treatment. Disclosure & Transparency: The disclosure and dissemination of key information about the company to all those entitled for such information. Responsibilities of the Board: The functions of the board include protecting the company, its shareholders & all its other stakeholders. The functions would include concerns about corporate strategy, risk, executive compensation & performance, accounting & reporting system, monitoring effectiveness & changing them, if needed.
Select, decide the remuneration & evaluate on a regular basis, and if necessary, change the CEO Oversee the conduct of the companys business Review & where necessary approve the companys financial objectives & major corporate plans & objectives. Provide advice & counsel to top management. Select & recommend candidate to shareholders for electing them to board of directors Review any other functions to be performed by law.
2 Seperation of the roles of the CEO & the Chairman: The roles of the CEO and the Chairman are different. The CEO takes care of the senior management whereas the chairman takes care of the board. Appointment to the board & reappointment: The board or its specially appointed committee selects & appoints the prospective director and gets the person formally elected by the shareholders at the ensuring Annual General Body Meeting. Directors & Executives Remuneration: This is one of the mixed & vexed issues of corporate governance that first came to the center stage. The key issues would include
Transparency Justifiability of the pay in the context of performance The process adopted in determining it Severance payments Non-executive directors pensions
3 Protection of Shareholders rights & their executives: There are a number of questions relating to this issue as 1. 2. 3. 4. Should companies adhere to 1 share 1 vote principle always? Should companies retain voting by a show of hands or by poll? Can shareholders resolution be bundled? Should shareholders approval be required for all major transactions?
They call for a corporate governance framework that protects and facilitates the exercise of shareholders rights They strongly support equitable treatment of all shareholders including minority & foreign shareholders. They recognize the importance of the role of stakeholders They stress the importance of timely, accurate and transparent disclosure mechanism. They deal with the board structures & responsibilities.
3. 4.
5.
6.
Business value enhancement Consulting and Enterprise Solution 6 Infrastructure Management Service Integrated Engineering Solution Product and Application Testing Six Sigma Consulting Offices of satyam computer consultancy limited are located global at America, Europe, Middle East Africa. SCS had achieved several awards and achievements for its meritorious work. To name a few:
1)
2)
UK trade and Investment India business award for CORPORATE SOCIAL RESPONSIBILITY Ranked No.1 in American society for and development best award 2007.
After the scam of rs.14000 crore came into light, the board of members were Replaced temporarily by experts. Several board members retired voluntarily. Even the auditing company, named KPMG was penalized. Several bidding took place for acquiring satyam by several companies. The final three bidders for satyam were L&T, Spice group and tech mahindra. After the successful bidding, Tech mahindra acquired satyam and the new chief executive officer is Mr. C.P. Gurnani. The two independent
directors are C.Achuthan and T.N.Manoharan. working directors included Mr. C.P.Gurnani and MR.Vineet Nayyar. 7
After the deal was aborted, four of the prominent independent directors resigned from the board of the company. In early January 2009, Raju revealed that the revenue and profit figures of Satyam had been inflated for past several years. The following were the inflated figures: Inflated cash and bank balance Rs.5040cr Non existent accrued interest Rs376cr Understated liability of Rs.1230cr Overstated Debtor position of Rs.490cr
Inflated staff by 12000 ( Actual were 40000) Revenue of Rs.2700cr (Actual were Rs.2112cr) Operating margin to be 6494 cr ( Actual were 61cr) 8
INDIAS LARGEST FRAUD- Rs.7800crore( now estimated as 14000 crore) As per the definition of corporate governance discussed above, A good corporate governance is one where a firm commits & adopts ethical practices across its entire value chain & in all of its dealing with a wide group of stakeholders encompassing employee, customer, vendors, regulators & shareholders in both good and bad times.
Corporate governance includes various parties: 1) shareholders 2) employees 3) management 4) bankers 5) government Governance issue at Satyam arose because of non fulfillment of obligation of the company towards the various stakeholders. It proved a poor relationship with all the stakeholders.
It is well known that a shareholder has a right to get information from the organization, such information could be with respect to the merger and acquisition. Shareholders expect transparent dealing in an organization. They even have right to get the financial reporting and records. 9 In the case of satyam, the above obligations were never fulfilled. The acquiuisition of maytas infrastructure and properties were announced, without the consent of shareholders. They were even provided with false inflated financial reports. The shareholders were cheated. It is well known that the collapse of any organizations reputation has a diect impact on the employees job. As per the case, employees were shown with a inflated figure. The excess of employees in the organization were kept under VIRTUAL POOL who received just 60% of their salaries and several were removed. The entire scam had its impact on management. Questions were raised over the credibility of management. Any organization has its obligation towards the Government by means of timely payment of taxes and abiding by the rules and laws framed up by the Government. As per the case with satyam , the company did not pay advance tax for the financial year 2009. As per the rule, the advance tax is to be paid 4 times a year; such was not fulfilled by them.
Finally the satyam computer consultancy limited didnt have good relationship iwt bak too. SCS was blacklisted by world Bank over charges of Bribery.It was declared ineligible for contracts to providing:
1) improper benefit to bankstaff.
The revelation further deepened concerns about poor corporate governance practices at the company. The case describes the corporate governance structure at Satyam, its code of conduct, roles and responsibilities of different committees under the board, whistle blower policy etc. It highlights the role played by the independent directors of Satyam in approving the Maytas deal and discusses their limitations.
11 CONCLSION: As earlier stated that corporate governance consist of four parties. In case of satyam fraud, board is unable to fulfill its role & responsibilities.
SHARE HOLDERS BOARD
MANAGEM ENT
EMPLOYEES
Now we discuss the responsibilities that should be followed ethically by board and what is actually did Ethical responsibilities: governing the organization by establishing broad policies and objectives; selecting, appointing, supporting and reviewing the performance of the chief executive; ensuring the availability of adequate financial resources; approving annual budgets; accounting to the stakeholders for the organization's performance.
Actual scenario: Despite the shareholders not being taken into confidence, the directors went ahead with the management's decision. The government too is equally guilty in not having managed to save the shareholders, the employees and some clients of the company from losing heavily.
Simple manipulation of revenues and earnings To show superior
performance Raising fictitious bills for services that were never rendered. To increase the Cash & bank balance correspondingly. Operating profits were artificially boosted from the actual Rs 61 crore to Rs 649 crore. Its financial statements for years were totally false, cooked up and... Never had Rs 5064 crores (US$ 1.05 Billion) shown as cash for several years.
Its liability was understated by $ 1.23 Billions.
So when the case came in light following are the actions that has been taken: Nasscum sets up panel to avoid satyam like case in future- formed a corporate Governance & ethics committee, chaired by N.R.Narayana Murthy (chairman and chief mentor of Infosys.) Hinduja Global chalks out 100 day plan for satyam. 8 Year ban on satyam to be reviewed.
Govt. orders CBI to probe fraud ( concerned about 52000 employees) - agencies ( 3 months time to probe) Serious fraud investigation office(SFIO) Market regulation SEBI, Institute of chartered accountancy India (ICAI) Andhra police
The Sebi had in December given a clean chit to Satyam in the probe on violation of corporate governance law. The government has realized the need of code of conduct & whistleblower policy, now we will discuss what is these terms and how they played an important role. CODE OF CONDUCT:
This Code of Business Conduct covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all employees and officers of the Company. Those who violate the standards in this Code will be subject to disciplinary action, including possible dismissal. Furthermore, violations of this Code may also be violations of the law and may result in civil or criminal penalties for you, your supervisors and/or the Company. The basic principles discussed in this Code are subject to any Company policies covering the same issues:
Compliance with Laws, Rules and Regulations Conflicts of Interest Corporate Opportunities Competition and Fair Dealing Political Contributions Discrimination and Harassment Health and Safety Confidentiality Protection and Proper Use of Company Asset
BIBLIOGRAPHY
1) 2)
3)