Business Ethics and Corporate Governance

Satyam Computer Ltd.

Submitted By:
Amit Singh (10030241051) Garima Nagpal (10030241059) Komal Anandani (10030241063) Mahalakshmi MN (10030241064) Pallavi Chavan (10030241069) Shivani Prakash (10030241084) Mitul Jain (10030241183)

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Table of Contents
Corporate governance .................................................................................................................... 4 Scandal at Satyam: Corporate governance..................................................................................... 4 Abstract ....................................................................................................................................... 4 Corporate Governance Of Satyam .................................................................................................. 5 Controversies: Satyam Computers ................................................................................................. 5 World Bank Fiasco....................................................................................................................... 5 Upaid Lawsuit.............................................................................................................................. 6 Maytas Takeover Controversy .................................................................................................... 6 Satyams justification for Maytas buyout deal ....................................................................... 7 Reaction of Investors .............................................................................................................. 7 Accounting Scam ......................................................................................................................... 8 Scam Details ............................................................................................................................ 8 The Guilty: Satyam Fraud ............................................................................................................ 9 The Takeover of Satyam ........................................................................................................... 11 Satyams corporate governance structure ................................................................................... 12 Independent Director ............................................................................................................... 13 Audit Committee....................................................................................................................... 13 Compensation Committee ........................................................................................................ 13 Relationship with Shareholders .................................................................................................... 14 Shareholder Activism .................................................................................................................... 15 Shareholders rights ................................................................................................................... 15 Satyam fraud turns spotlight on shareholder activism ................................................................ 15 Legal Liability, Compliance and Any Accounting Issues ................................................................ 16 Mr. Raju and Company Insiders' Role ................................................................................... 18 Auditors Role......................................................................................................................... 18 Board of Directors Role ......................................................................................................... 18 Directors and executives remuneration ....................................................................................... 19

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Compensation Committee ............................................................................................................ 19 Purpose ......................................................................................................................................... 20 Composition .................................................................................................................................. 20 Responsibilities and duties ........................................................................................................... 20 Responsibilities of the Board ........................................................................................................ 22 Committee On Directors And Corporate Governance Charter .................................................... 22 Purpose ..................................................................................................................................... 23 Committee Membership ........................................................................................................... 23 Committee Authority and Responsibilities ............................................................................... 23 Satyam Moral Dilemma: ............................................................................................................... 25 Human right violations or promotion in the firm ......................................................................... 26 Maintain equitable & safe workplace ........................................................................................... 27 Employment Practices .............................................................................................................. 27 Non Solicitation ..................................................................................................................... 28 Anti-sexual Harassment ............................................................................................................ 28 Health, safety and environment ............................................................................................... 29 References .................................................................................................................................... 29

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SATYAM FRAUD; A FAILURE

OF CORPORATE GOVERNANCE
Q1) Significance of Corporate Governance
Corporate governance
Corporate governance refers to the set of systems, principles and processes by which a company is governed. They provide the guidelines as to how the company can be directed or controlled such that it can fulfill its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society. The management of the company hence assumes the role of a trustee for all the others.

Scandal at Satyam: Corporate governance

Abstract
Corporate governance in India has most recently been debated after the corporate fraud by Satyam founder and chairman Ramalinga Raju. In fact, trouble started brewing at Satyam around December 16 2008 when Satyam announced its decision to buy stakes in Maytas Properties and Infrastructure for $1.3 billion. The deal was soon called off owing to major discontentment on the part of shareholders and plummeting share-price. However, in what has been seen as one of the largest corporate frauds in India, Raju confessed that the profits in the Satyam books had been inflated and that the cash reserve with the company was minimal. Ironically, Satyam had received the Golden Peacock Global Award for Excellence in Corporate Governance in September 2008 but was stripped of it soon after Raju's confession.

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Corporate Governance Of Satyam

Vision Statement To leverage information, knowledge and technology to enhance human endeavor

Core values of Satyam: According to Satyam's annual reports, corporate governance was given high importance in the company. The corporate governance in Satyam was driven by its core values :

Belief in People Entrepreneurship Customer Orientation

Pursuit of Excellence

Controversies: Satyam Computers

World Bank Maytas acquisition Upaid lawsuit Accounting scandal of 2009

World Bank Fiasco

The World Bank had banned Satyam from doing business with it for 8 years due to inappropriate payments to the World Bank's staff. The World Bank accused Satyam of giving improper benefits to its (the Bank's) staff and of failing to maintain documentation to support fees charged for its subcontractors. However, it clarified that Satyam was not involved in incidences of data theft or malicious attacks that had been made on the Bank's information systems.

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Upaid Lawsuit
UK mobile payments company Upaid Systems is suing Satyam for over 1 billion US dollars on complaints of fraud, forgery and breach of contract. On 9-December2009 Satyam has settled the lawsuit with UPAID for $70MM, of which $45MM is payable upon regulatory approval, and the remaining $25MM is payable a year after the initial payment

Maytas Takeover Controversy

In mid-December 2008, Satyam announced acquisition of two companies - Maytas Properties andMaytas Infrastructure owned by the family members of Satyam's founder andChairman Ramalinga Raju (Raju). It planned to acquire 100% and 50% stakes in Maytas property and infra for $1.6B. Due to adverse reaction from institutional investors and the stock markets, the deal was withdrawn within 12 hours. Questions were raised on the corporate governance practices of Satyam with analysts and investors questioning the company's board on the reasons for giving consent for the acquisition as it was a related party transaction.

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Satyams justification for Maytas buyout deal De-risk the core business the integrated organization would be stronger and more diversified to deal with the uncertainty of the market. feeling that in the recent times it is difficult to make a strategic deal with other IT companies.

Reaction of Investors The shareholders realised that the buyout was not profitable for them. Satyam using the reserve cash to purchase Maytas Infra and Maytas Properties was a big risk. Part of investors succeeded to thwart an attempt by the minority-shareholding promoters to use the firms cash reserves to buy out two companies owned by them Maytas Properties and Maytas Infra. This aborted attempt at expansion precipitated a collapse in the price of the companys stock and a shocking confession of financial manipulation and fraud from its chairman, B. Ramalinga Raju The promoters decided to inflate the revenue and profit figures of Satyam. In the event, the company had a huge hole in its balance sheet, consisting of non-existent assets and cash reserves that have been recorded and liabilities that are unrecorded.

THOUGH UNDER pressure from Mutual Funds and minority stakeholders, Indias fourth largest software company Satyam Computer called off the decision to purchase 51 per cent stake in Maytas Infrastructure and 100 per cent stake in Maytas properties but it raised serious issues which otherwise was not seen in Indian Inc

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Accounting Scam
Satyam faced is the biggest fraud in India's corporate history. The company management, mainly disgraced chairman B Ramalinga Raju, kept everyone in the dark for a decade.

On January 7th 2009, very surprisingly the CEO, B. Ramalinga Raju released a press statement confessing that the books of accounts were tampered with and the income figures in the last few years were inflated. More interesting, rather amusing, was his admission that no one else was involved in this entire episode and taking the onerous responsibility on himself. And this confession triggered off a series of events resulting in the arrest of B. Ramalinga Raju on January 10th 2009.

Scam Details
7 January 2009, companys previous Chairman Ramalinga Raju resigned after notifying board members and the Securities and Exchange Board of India (SEBI) that Satyam's accounts had been falsified. Raju confessed that Satyam's balance sheet of 30 September 2008 contained: o Inflated figures for cash and bank balances of Rs 5,040 crores as against Rs 5,361 crore reflected in the books. o An accrued interest of Rs. 376 crore which was non-existent. o An understated liability of Rs. 1,230 crore on account of funds was arranged by himself.

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An overstated debtors' position of Rs. 490 crore (as against Rs. 2,651 crore in the books.

The Guilty: Satyam Fraud

The promoters Since the promoters, in this case, held only about 8 percent shares, their idea to push through the Maytas acquisition deal was defeated by an angry lot of shareholders.

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Directors and independent directors The Satyam board, including its five independent directors had approved the founder's proposal to buy 51 per cent stake in Maytas Infrastructure and all of Maytas Properties, owned by the family members of Satyam chairman B Ramalinga Raju. Despite the shareholders not being taken into confidence, the directors went ahead with the management's decision. The decision of acquisition was, however, reversed 12 hours later after investors dumped Satyam's stock and threatened action against the management.

Satyams auditors PWC PwC India's audit firm Price Waterhouse, was alleged to have been involved in the Rs 7,000crore Satyam fraud case, which stunned the corporate world in 2009. Price Waterhouse was the statutory auditor of Satyam, now known as Mahindra Satyam.

PwC has written a letter to the BOD of Satyam that its audit may be rendered "inaccurate and unreliable" due to the disclosures made by Satyam's (ex) Chairman.

Is it real? How could Auditors miss the gaping hole when Auditors do bank reconciliation to check whether the money has indeed come or not. They check bank statements and certificates. So was this a total lapse in supervision or were the bank statements forged?

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The bankers If the auditors were conned, it means that either the bank statement or certificates were forged. Satyam's banks -- ICICI Bank, HDFC Bank, Bank of Baroda, etc

The government 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.

The Takeover of Satyam

Mahindra Satyam Tech Mahindra paid Rs 1757 Crore for a 31% stake in the company, at Rs 58 per share. Satyam Computer Services zoomed 15% to Rs 54.20 ahead of the announcement of the highest bidder for the company on April 13, 2009. In India this moment was full of praise for the manner and speed with which the reconstituted board of Satyam Computer Services found a strategic investor.

Q2. Corporate Governance: the way in which the board is structured, changes over time, relations with shareholders, and shareholder activism
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Satyams corporate governance structure

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Independent Director
Member of the Board of Directors of an entity who is an outsider, meaning he or she is not an employee of that entity. An example is a broker sitting on the Board of a client company. Such directors are important because they bring unbiased opinions regarding the company's decisions and diverse experience to the company's decision-making process. In order not to have a conflict of interest, independent directors should not participate on the boards of directly competing businesses. Directors are typically compensated based on a standard fee for each board meeting.

Audit Committee
The Audit Committee is an independent body answerable directly to the Board of Governors and responsible for verifying that the operations of the Bank have been conducted and its books kept in a proper manner. At the time of approval of the financial statements by the Board of Directors, the Audit Committee issues its statements thereon. The reports of the Audit Committee on the results of its work during the preceding year are sent to the Board of Governors together with the annual report of the Board of Directors. The Audit Committee is composed of six Members, appointed by the Board of Governors for a non-renewable term of office of six consecutive financial years.

Compensation Committee
The role of the compensation committee is to set appropriate and supportable pay programs that are in the organizations best interests and aligned with its business mission and strategy Business Ethics Page 13

Relationship with Shareholders

An accounting fraud was the last thing investors in India would have imagined as a trigger for a reversal in investor sentiment.. The share prices of Satyam saw a sharp fall after Rajus confession. The share prices fell down from 190 to 30 (approximately) in a matter of a day.

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. In the case of satyam, the above obligations were never fulfilled. The acquisition 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.

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Shareholder Activism
Shareholders rights
The rights of shareholders are namely as below:
They should secure ownership of their shares. They have voting rights. They have right to full disclosure of information. They can participate in decision on sale or any other change in corporate assets & new shares. Equitable treatment of shareholders: All the shareholders including minority and foreign shareholders should get equal treatment. 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.

Satyam fraud turns spotlight on shareholder activism

In the failed corporate story of Satyam in India, Satyam under its beleaguered Chief Ramalinga Raju, tried to plough huge sums of money into its offshoot Maytas Infra, a move which made little business sense and value. A vociferous and vehement opposition by shareholders not only blocked the deal but also led to the uncovering of one of the largest corporate frauds in Indian Corporate history The Satyam Scam. Business Ethics Page 15

Active shareholders can be more effective in goading managements to create value rather than passive shareholders. In fact, such activism is seen as a good counter to boards that aren't truly independent, and where ownership and management aren't distinct. Appointing independent directors on the board is of good cosmetic value but, as the Satyam episode reveals, such directors are rarely potent enough to challenge inappropriate decisionmaking. Satyam episode has succeeded in putting such institutional investors back in the spotlight. Institutional investors own 61.5 per cent in Satyam and were largely responsible in persuading the management to reverse two visibly wealth-destroying acquisitions. By mercilessly hammering the stock, these investors succeeded in doing something the independent directors couldnt.

Q3) Legal liability, compliance and any accounting issues

Legal Liability, Compliance and Any Accounting Issues
Satyam was as an example of India's growing success. Satyam won numerous awards for innovation, governance, and corporate accountability. In 2007, Ernst & Young awarded Mr. Raju with the Entrepreneur of the Year award. On April 14, 2008, Satyam won awards from MZ Consult's for being a leader in India in corporate governance and accountability.

As stock markets around the world collapsed during 2008, the Indian Stock Exchange, the Sensex, fell from a high of over 21,000 to below 8,000 between January 2008 and October 2008. The enormous losses caused investors to withdraw large amounts of cash from their investments. These cash withdrawals in turn triggered the discovery of several cases of financial fraud in America, as perpetrators could no longer hide the results. Satyam continued to report positive results during 2008 and claimed success in navigating the economic crisis. In October 2008, Satyam reported net income of $132.3 million, an increase of 28 percent from the same quarter the previous year. Saytam asserted that, despite the challenging environment, it continued to find opportunities for growth.

The first crack in the company's reputation occurred during October, when the World Bank fired Satyam and issued an eight-year ban against the company. The World Bank accused Satyam of installing spy systems on its computers and stealing assets from the World Bank. In addition, during an October conference call reporting earnings, one stock analyst drew attention to large cash balances in non-interest bearing bank accounts. The analyst expressed concern about the large balances and expressed reservations about the accuracy of the Business Ethics Page 16

numbers. Investors ignored the analyst's comment and the stock price rose with the reports of positive earnings and revenue growth.

In December 2008, Satyam's Board of Directors unanimously approved the purchase of Maytas Properties and Maytas Infrastructure, two companies unrelated to the information technology field. At the time, Mr. Raju stated that he and the Board anticipated that the market would "be delighted" by the two transactions as it would provide Satyam with greater diversification. However, investors were outraged over the transactions because Mr. Raju's family held a larger stake in Maytas Properties and Maytas Infrastructure than it did in Satyam. Shareholders viewed the transactions as an attempt to siphon money out of Satyam into the hands of the Raju family. Satyam quickly aborted the transactions, but the incident still caused significant damage to Satyam's reputation as a well-managed company. Analysts immediately soured on the company and put sell recommendations on its stock. Satyam's shares dropped nearly 10 percent and four of the five independent directors resigned. On December 30, analysts with Forrester Research advised clients to stop doing business with Satyam because of the fear of widespread fraud. Satyam hired Merrill Lynch to advise it on ways to increase shareholder value. By January 5, 2009, rumors circulated about several potential mergers between Satyam and competitors. On January 7, just hours before Mr. Raju disclosed the fraud, Merrill Lynch sent a letter to the stock exchange indicating that it was withdrawing from its engagement with Satyam because during the course of its representation it learned of material accounting irregularities. The Board called an emergency meeting for January 10 to address the company's rapidly deteriorating reputation.

On January 7, 2009, Mr. Raju disclosed in a letter to Satyam's Board of Directors that he had been manipulating the company's accounting numbers for years. Mr. Raju said the manipulation started out small, and grew larger by the year.

India also has anti-corruption and anti-fraud laws, such as the Prevention of Corruption Act, the Prevention of Money Laundering Act and Rules thereunder, as well as various checks under the SEBI Prohibition of Fraudulent and Unfair Practices Regulations, 2003. Yet the Satyam fraud happened, and became public knowledge, not because of any stringent checks, but on the promoters confession. The government stepped in and in exercise of its powers under the Companies Act, 1956 replaced the board with high profile independent professionals. Its another matter that even earlier there were reputed independent directors on the Board which did not prevent the downslide. The role of the new board was temporary and transitory, to facilitate a takeover in order that the company and its business could survive. Business Ethics Page 17

Legal liabilities and accounting issues fall greatly on the following: Mr. Raju and Company Insiders' Role
Mr. Raju claimed that he overstated assets on Satyam's balance sheet by $1.47 billion. Nearly $1.04 billion in bank loans and cash that the company claimed to own was nonexistent. Satyam also underreported liabilities on its balance sheet. Satyam overstated income nearly every quarter over the course of several years in order to meet analyst expectations. Mr. Raju and the company's global head of internal audit used a number of different techniques to perpetrate the fraud. Using his personal computer, Mr. Raju created numerous bank statements to advance the fraud. Mr. Raju falsified the bank accounts to inflate the balance sheet with balances that did not exist. He inflated the income statement by claiming interest income from the fake bank accounts. Mr. Raju also revealed that he created 6,000 fake salary accounts over the past few years and appropriated the money after the company deposited it.

Auditors Role
PWC signed Satyam's financial statements and was responsible for the numbers under Indian law. Whenever Satyam needed more income to meet analyst estimates, it simply created fictitious sources and it did so numerous times without the auditors ever discovering the fraud. Suspiciously, Satyam also paid PWC twice what other firms would charge for the audit, which raises questions about whether PWC was complicit in the fraud. Furthermore, PWC audited the company for nearly 9 years and did not uncover the fraud, whereas Merrill Lynch discovered the fraud as part of its due diligence in merely 10 days. Hence several questions have been raised at the integrity of the auditing firm.

Board of Directors Role Satyam's Board of Directors consisted of nine members. Five members of the Board were independent as required by Indian listing standards. In its regulatory filings with the SEC, Saytam revealed that it did not have a financial expert on the board during 2008. Further concerns later developed surrounding the Board of Directors lack of independence. The Board first came under fire on December 16, 2008 when it approved Satyam's purchase of real estate companies in which Mr. Raju owned a large stake. The botched transaction provided the investors with the impression that the Board was not actively monitoring Satyam. Furthermore, the Board should have caught some of the same red flags that the auditor, PWC, missed. The Board of Directors should have been concerned with the knowledge that Mr. Raju decreased his holdings of Satyam significantly over the three years leading up the disclosure of the fraud. Mr. Raju's holdings fell from 15.67 percent in 2005-2006 to 2.3 percent in 2009.

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Q4) Executive compensation: who and how the compensation is determined, Role of board and compensation committee, and disclosure to shareholders and the public.
Directors and 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.

The following is the remuneration paid to the company's executive directors and which is thereby charged to current year's profit and loss account. The remuneration paid to directors includes the following: 1. 2. 3. 4. Amount of salary paid Contribution to Provident Fund Value of perquisites Performance linked incentive to whole time directors and also the commission paid to them. 5. Sitting fees paid to the directors. The companies either use directors' remuneration or managerial remuneration as a nomenclature for this expense. This amount is reported by the companies in their annual report in the schedule of employee remuneration or schedule of operating expenses.

Compensation Committee
The Compensation Committee has primary responsibility for reviewing and approving the compensation of the Company's CEO and other executive officers; overseeing the Company's benefit plans; and reviewing and making recommendations to the full Board regarding Board compensation.

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Purpose
The Compensation Committee (the "Committee") of the Board of Directors (the "Board") of Satyam Computers (the "Company") shall discharge the Board's responsibilities with respect to

setting the compensation of the Company's executive officers; overseeing the Company's equity-based plans; reviewing and making recommendations to the full Board regarding Board compensation; Performing such other duties and responsibilities as may be consistent with the provisions of this charter.

Composition
The Committee shall be comprised of three or more members of the Board, each of whom shall be determined by the Board to be "independent" under the rules of the New York Stock Exchange and applicable legal requirements.

The members of the Committee shall be appointed by the Board at the annual organizational meeting of the Board and shall serve until such member's successor is duly elected and qualified or until such member's earlier resignation or removal. A member of the Committee may be removed, with or without cause, by a majority vote of the Board.

Unless a Chairperson is elected by the full Board, the members of the Committee shall designate a Chairperson by majority vote of the full Committee membership. The Chairperson shall be entitled to cast a vote to resolve any ties. The Chairperson will chair all regular sessions of the Committee and set the agendas for the Committee meetings.

The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate. The Compensation Committee was constituted of Independent and Non-executive Directors.

Responsibilities and duties

To fulfill its responsibilities and duties, the Committee shall:

Compensation for Executive Officers and Directors

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1. Review and approve corporate goals and objectives relative to the compensation of the CEO and the non-independent chairman, if any, evaluating the performance of the CEO and the non-independent chairman, if any, in light of these goals and objectives and establishing the annual compensation of the CEO and the non-independent chairman, if any, taking into consideration such evaluation and feedback from the annual review of the CEO and the non-independent chairman, if any, by the Nominating & Governance Committee and the Lead Director and approve the material terms of any employment agreements, severance arrangements, change-in-control arrangements or similar agreements or arrangements with the CEO and the non-independent chairman, if any, and any material amendments thereto; 2. Set the compensation of the Company's other executive officers, taking into consideration input from the CEO, and approve the material terms of any employment agreements, severance arrangements, change-in-control arrangements or similar agreements or arrangements with such executive officers and any material amendments thereto; 3. Review and make recommendations to the Board with respect to the appropriateness of the Board's compensation on a biennial basis, or as circumstances may warrant; and 4. Review and discuss with management, on at least an annual basis, managements assessment of whether risks arising from the Companys compensation policies and practices for its employees are reasonably likely to have a material adverse effect on the Company, and have the chair of the Committee review annually with the Audit Committee managements risk assessment process and conclusion. 5. The Committee evaluates compensation and benefits for Executive Directors and frames policies and systems for Associate Stock Option Plans. 6. Satyam's compensation committee reviews among other things its general compensation structure, and reviews and recommends the compensation and benefits of directors and the chief executive officer, subject to ratification by the Board of Directors.

Incentive-Compensation and Equity-Based Plans 1. Establish and maintain the Company's equity compensation policies and practices; 2. Review and make recommendations to the Board with respect to the Company's incentive-compensation plans and equity-based plans that are subject to Board approval;

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3. Unless otherwise provided in a plan document or resolutions of the Board, oversee the administration of the Company's equity-based plans, including the review of programs for granting awards to eligible employees under the Company's equity-based plans, and oversee the activities of the individuals responsible for administering those plans; 4. Review and approve all of the Company's equity-based plans that are not otherwise subject to the approval of the Company's shareholders; 5. Review and make recommendations to the Board with respect to the Company's pension plans; and 6. Review and monitor key performance metrics of the above. Public Disclosure 1. Review and discuss the Compensation Discussion and Analysis ("CD&A") with Company management and, based on the review and discussion, make a recommendation to the Board regarding whether to include the CD&A in the Company's proxy statement and/or annual report on Form 10-K; and 2. Prepare a Compensation Committee Report and authorize the inclusion of the report in the Company's proxy statement and/or its annual report on Form 10-K.

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. He selects, decides the remuneration & evaluates CEO on a regular basis. Duties of boards of directors include.

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; Setting the salaries and compensation of company management.

Committee On Directors And Corporate Governance Charter

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Purpose
The Committee on Directors and Corporate Governance is established by the Board (1) to identify individuals qualified to be Board members consistent with criteria approved by the Board, and to recommend to the Board director nominees for the next annual meeting of shareowners; (2) to recommend to the Board directors to serve on each standing committee; (3) to gather and review information for the annual evaluation of the Chairman of the Board and the Chief Executive Officer, to be presented to the full Board for its discussion and review; (4) to ensure that succession planning takes place for the position of Chief Executive Officer and other senior management positions; (5) to lead the Board in its annual review of the Board's performance; and (6) to develop and recommend to the Board a set of Corporate Governance Guidelines.

Committee Membership
The Committee consists of no fewer than three members. Each member of the Committee shall meet the independence requirements of the New York Stock Exchange and the Company's Corporate Governance Guidelines. The members of the Committee is established and removed by the Board. A majority of the members constitute a quorum.

Committee Authority and Responsibilities

The Committee seeks individuals qualified to become Board members for recommendation to the Board, including evaluating persons suggested by shareowners or others, and conduct the appropriate inquiries into the backgrounds and qualifications of possible nominees. Directors should possess the highest personal and professional ethics and integrity and be committed to representing the long-term interests of the shareowners. The Committee determines each proposed nominee's qualifications for service on the Board. The assessment includes a review of the nominee's judgment, experience, independence, understanding of the Company's or other related industries, and such other factors as the Committee concludes are pertinent in light of the current needs of the Board. Each nominee should be a person of integrity and be committed to devoting the time and attention necessary to fulfill his or her duties to the Company. Diversity of race, ethnicity, gender and age are important factors in evaluating candidates for Board membership. The Committee takes advice and counsel from the Public Issues and Diversity Review Committee in discharging this responsibility. The Committee has the sole authority to retain and terminate any search firm to be used to identify director candidates and shall have sole authority to approve the search firm's fees and

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other retention terms. The Committee also has authority to obtain advice and assistance from internal or external legal, accounting or other advisors. The Committee has oversight of the evaluation of the Board and management. The Committee evaluates the performance of each director before recommending to the Board his or her nomination for an additional term as director. The Committee gathers and reviews information for the annual evaluation of the Chairman of the Board and the Chief Executive Officer, to be presented to the full Board for its discussion and review. During the year, the Committee receives input on the Board's performance from directors and, through its Chairman, discusses the input with the full Board and oversees the full Board's review of its performance. The Committee periodically reviews and reassesses the adequacy of the Corporate Governance Guidelines and recommends any proposed changes to the Board for approval. The Committee considers issues involving related party transactions with directors and similar issues. The Committee has the authority to consider for approval any related party transactions and, if possible, approve such transactions before they are entered into. The Chairman of this Committee is the presiding director at all meetings of non-management directors, these meetings are held in executive sessions on a regular basis but at least once annually. The Committee recommends and reviews all matters pertaining to fees and retainers paid to directors for Board and Committee service and for serving as Chairman of a Board committee, and have the sole authority to employ consultants or advisors to evaluate director compensation and to approve consulting fees and other retention terms. In determining compensation, the Committee takes into consideration the responsibilities of the directors and fees and other forms of compensation being paid by other corporations comparable to the Company. The Committee makes regular reports to the Board. The Committee can form and delegate authority to subcommittees when appropriate. The Committee periodically reviews and carried out reassessment for the adequacy of this Charter and recommends any proposed changes to the Board for approval. The Committee annually reviews its own performance.

Q5) Moral issues and moral dilemmas involved in the management and ethical code of conduct in the company in the context of the goals of the organisation

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Satyam Moral Dilemma:

An ethical problem cannot be resolved unless it is first recognized as a dilemma. Reward or punishment to ethical integrity and moral courage decide the act of an individual. The existence of rules, policies, job descriptions and cultural norms will discourage individuals from unethical behavior even if they have a feeble moral sense. But, in the presence of unethical organizational culture and structure, even highly moral individuals may become corrupt. The culture at Satyam, especially dominated by the board, symbolized such an unethical culture. In the case of Mr. Raju, Satyam, as the smallest of the big four players, was under pressure to show extraordinary results in order to survive. Apart from that there was greed, perhaps reckless greed, causing the brothers to indulge in illegal and unethical activities. On one hand, his rise to stardom in the corporate world coupled with immense pressure to impress investors made Mr. Raju a compelled leader to deliver outstanding results. On the contrary, Mr. Raju had to suppress his own morals and values in favour of the greater good of the company. The board connived with his actions and stood as a blind spectator. The lure of big compensation to members further encouraged such behavior. But, in the end, truth is sought and those violating the legal, ethical, and societal norms are taken to task. The fraud finally had to end and the implications were far reaching. The public confession of fraud by Ramalinga Raju speaks of integrity still left in the individual. His acceptance of guilt and blame for the whole fiasco shows a bright spot of an otherwise tampered character. After quitting as Satyam's Chairman, Raju said, "I am now prepared to subject myself to the laws of land and face consequences thereof." Mr. Raju had many ethical dilemmas to face, but his persistent immoral reasoning brought his own demise. Servant-leadership is a philosophy and practice of leadership, coined and defined by Robert Greenleaf. Lets discuss this case by using this philosophy.

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Egoism: When a person acts to create the greatest good for himself or herself. You can find people exhibiting this orientation at every level of an organization. When the organization and its employees make decisions merely to achieve individual goals (at the expense of others), they lose sight of a larger goal. This is where Mr. Rajus behavior fell into. Utilitarianism: The idea that the moral worth of an action is determined solely by its usefulness in maximizing utility or minimizing negative utility. The focus is to create the greatest good for the greatest number of people. Altruism: The opposite of egoism, a persons primary purpose is to promote the best interests of others. From this perspective, a leader may be called on to act in the interests of others, even when it runs contrary to his self-interests.

Q6) Human right violations or promotion in the firm

Human right violations or promotion in the firm
Human rights are relevant to the economic, social and environmental aspects of corporate activity. For example, labour rights requiring companies to pay fair wages affect the economic aspect. Human rights such as the right to non-discrimination are relevant to

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the social aspect. And the environmental aspects of corporate activity might affect a range of human rights, such as the right to clean drinking water. So, while the primary responsibility for the enforcement of international human rights standards lies with national governments, there is a growing acceptance that corporations also have an important role to play. Corporations impact on human rights in significant ways. These impacts have increased over recent decades as the economic might and political influence of corporations has grown, and as corporations has become more involved in delivering services previously provided by governments. Corporations have come to recognise that part of being a good corporate citizen includes respecting the human rights of those who come into contact with the corporation in some way. This might be direct contact (for example, employees or customers), or indirect contact (for example, workers of suppliers, or people living in areas affected by a corporations activities). Corporations are also responding to the fact that many consumers and investors expect corporations to act in a socially responsible manner. The extent to which a company implements a comprehensive CSR program can influence consumer and investor decisions. In Mahindra Satyam, it being our case company, they have following guidelines and policy that supports as well as monitors practise of human rights promotion.

Maintain equitable & safe workplace

Employment Practices
The policy of the company is to provide equal opportunities to all its Associates without being biased to their race, region, caste, colour or ancestry, marital status, gender, sexual orientation, age, nationality, ethnic origin or disability. The company also has a policy to eliminate overt and covert bias in recruiting, promoting & separating male and female associates. The company strives to hire people on the basis of their qualifications, prior experience, expertise and abilities, local & constitutional mandate with regard to recruitment (if any) and is determined to provide a work environment free of any form of unlawful discrimination. The company shall promote gender equality in providing access to opportunities for learning and participation in decision making. The company shall put in place organisational policies and practices that address various Associates issues including sexual harassment, work life imbalance and professional discrimination.

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Any associate with questions or concerns regarding any act or discrimination in the workplace is encouraged to bring the issue to the attention of his/her immediate supervisor or head of the concerned business/support unit and further to the CORPORATE OBUDSMAN.

Non Solicitation The Company believes that the services of Associate are crucial to Mahindra Satyam and its clients. While employed with Mahindra Satyam and a period of one year thereafter , Associates shall not solicit and shall not provide services to any of the Satyam (on the same account/project) with whom they have been associated in the preceding one year from the date of separation (for any reason) from Mahindra Satyam. During the tenure of employment with Mahindra Satyam and after the cessation of employment, the Associate is responsible for safeguarding Mahindra Satyams business and confidentiality information including its customers names and other business details, information regarding technical, trade or business data. Associates should not solicit or induce or endeavour to solicit or induce any person who is employed by the company to cease working for or providing services to Mahindra Satyam. Associate should not also solicit or induce or endeavour to solicit any consultant, supplier or service provider to cease to deal with the company and shall not interfere in any way with the relationship between a consultant, a supplier or a service provider and the company. In any event of a violation of the above mentioned Mahindra Satyam reserves the right to any legal remedy available to it under applicable laws and claim any such damages from you as it may incur from this act of yours.

Anti-sexual Harassment
The companys anti-sexual harassment policy aims at bringing zero-tolerance policy on any act of sexual harassment/any discrimination based on sex and promotes a work environment that encourages mutual respect, promotes respectful and congenial relationships between Associates and is free from all forms of sexual harassment to any Associate or Applicant for employment by anyone including vendors, or customers. Sexual-harassment is form of discrimination which includes a range of behaviour from seemingly mild transgressions and annoyances, to actual sex abuse or sexual assault, and will not be accepted in any form or manner. Sexual harassment includes behaviour of associates, managers, vendors and/or customers who engage in verbally or physically harassing behaviour, which has the potential for humiliating or embarrassing an associate of the company.

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According to Mahindra Satyams Zero-tolerance policy: All of the company, both management and non-management, are responsible for assuring that a workplace free of sexual harassment is maintained. Any Associate may file a sexual-harassment complaint regarding incidents experienced personally or incidents observed in the workplace. The company is committed in maintaining a lawful, pleasant work environment where all Associates are able to effectively perform their work without interference of any type and requests the assistance of all Associates in this effort. All company supervisors and managers are expected to adhere to the companys AntiSexual harassment policy.

Health, safety and environment

Protecting the environment and the health and safety of Associates is of prime importance to the company and the company strives to provide a safe, healthy and hygienic environment to its workforce. The company attaches its greatest value to its personnel. It conducts its operations in a safe manner that minimizes adverse environmental impact. It strives to prevent all possible accidents, incidents, injuries and occupational illness. Company believes in creating awareness among its Associates on work place practices and communicating information, instruction and training programs to all the Associates to enable them to comply with the Environment, health and safety policy of the company.

References
www.reportjunction.com www.mahindrasatyam.com

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