u D a n i

im a nsh rated
H In t e g
M B A
BMS-
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Contents

 Introduction
 Principles of CocorporatGovernance
 Pillars of corporate governance
 Why? Corporate Governance
 Corporate Governance India
 Satyam Scam (case study)
 Conclusion
 Corporate Governance
• Corporate Governance is set of principles
or guidelines on which a company is
governed.
• It ensures that the corporate works in a
way it supposed to work to achieve the
desired goals.
• It makes the corporations accountable to
each stakeholder including, directors,
shareholders, employees, customers etc.
 Lay solid foundations for management and oversight.

Formulation of policies and provide input into final approval of

management's development of corporate strategy and
performance objectives.

 Structure the Board to add value

The Group must ensure that there is a balance of independence,

diversity of skills, knowledge, experience, perspective and
gender among the Directors. It should have a Board of an
effective composition.
 Promote ethical and responsible decision-making
The Board ensures that the management promotes ethical
and responsible decision-making and complies with all
relevant policy, laws, regulations and codes of best business
practice using the Group's ethics and operating principles.

 Safeguard integrity in financial reporting

The Board has a structure in place to independently verify

and safeguard the integrity of the holding company’s
financial reporting, including the internal audit department
headed by the chief internal auditor and the establishment,
as required by law, of the audit committee, to which the
chief internal auditor reports.
 Make timely and balanced disclosure
The Board shall promote timely and balanced disclosure of all
material matters concerning the Bank.

 Respect the rights of shareholders

The Board respects the rights of shareholders and facilitates the
effective exercise of those rights.
Board empowers the shareholders by:
Communicating effectively with them.

Providing them understandable information about the corporate.

Making it easy for them to participate in general meetings.
Pillars of
Corporate Governance
 The four pillars of corporate governan
ce are accountability, fairness, trans
parency and independence

• Accountability:It ensures the liability of the

person who takes decision for the interest
of the others. Hence persons like managers,
chairmen, directors and other officers
should be accountable to other
stakeholders of the corporate.
 Fairness:The corporate governance framework should
protect shareholder rights and ensure the equitable
treatment of all stakeholders, including minority and foreign
shareholders.

 Transparency:Disclosure of the relevant information about

corporate in timely and accurate manner is necessary. It
helps stakeholder to know their rights and day to day
activity of the corporate.

 Independence:Independence of top manager is important

for smooth functioning of the corporate. Board of Director
must work without the interference of any interested party
in the corporate.
 Why? Corporate Governance.
 Strong and effective corporate governance
helps to cultivate a company culture of
integrity, leading to positive performance
and a sustainable business overall.

 Essentially, it exists to increase the

accountability of all individuals and teams
within your company, working to avoid
mistakes before they can even occur.
When a company has solid corporate
governance, it signals to the market that the
organization is well managed and that the
interests of management are aligned with
external stakeholders. As a result, it can
provide the company with a strong
competitive advantage.
Companies Having Best Corpora
te Governance in India (2019)
Corporate Governance in India
The concept of corporate governance emerged in the
1990s after the economy of India opened up to the
foreign markets; in the era of Economic Liberalization,
Privatization and Globalization.

Industry Association Confederation of Indian Industry

(CII) publicly introduced the code of Corporate
Governance in 1998 that was to be followed by Indian
Companies (listed), whether they belonged to the
private or public sector including Banks and Financial
Institutions.
 A company is not all about just profits, market
valuations, P/E multiples and turnovers, there is a
lot that goes into building its position and image.
Corporate Governance is one such hidden force.
After numerous scandals, maligned reputations
and economic downturns, companies are now
realising that few concrete steps towards better
governance could have saved years of their labour.

In the last decade, corporate fraud and

governance failure is occurring frequently which is
why we require good corporate governance in the
country.
The Satyam Scam
 Background
“A lie keeps growing and growing, until it is clear”
-Pinocchio.

 Satyam computers was founded in 1987.

 It converted into Public Ltd Co. in 1992.
 The company offers consulting and information
technology services spanning various sectors.
 The IT firm was also the winner of the Golden
Peacock Award for Excellence in Corporate in
2002.
 Raju has won several awards and global accolades
which include Ernst & Young Entrepreneur of the
Year for Services in 1999, Dataquest IT Man of
the Year in 2000, and CNBC's Asian Business
Leader - Corporate Citizen of the year award in
2002.
 Fraud
 Raju and his brother,were arrested by
Andhra Pradesh Police(jan 2009)on
charges of Breach of Trust, Conspiracy,
Cheating, Falsification of Records.
 Raju has mislead various investors.
 Raju has also used dummy accounts to
trade in Satyam’s shares.
 He has violated the insider trading norm.
 Funds from Satyam were diverted to
Maytas.
 The money raised from this fraud was being used for buying
acres of land in AP for capturing the booming real estate market.

 Facts had to be manipulated for display healthy

profits for the company and every effort was made
to cover the manipulated accounts records.
 Impact of the Scam
 Jobs of over 50000 employee's were at risk.
 India’s global image was suffered.
 Indian stock market fell drastically
 The GDP fell by 0.4%.
 Country's booming economy was at risk.
 IT sector suffered a downtown.
 On January 7, 2009 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
found accounting irregularities.
 The same day Raju sent letter to Satyam’s Board
Of Directors admitting that he manipulated the
company’s accounts for numbers years and also
ramalinga Raju sent off an email to Sebi and
stock exchanges, wherein he admitted and
confessed to inflating the cash and bank balances
of the company
 Regulatory action's taken
after the Scam

 Introduction of new rules by the market regulator,

making it compulsory for promotors of companies to
disclose the percentage of shares pledge by them to
lenders.

 Appointment of independent auditors & company

secretary by Company Law Board to conduct Audit of
any private organization.
Increased financial accounting disclosure
and aoption of international standards.
Creation of new corporate code of conduct
by Ministry of Corporate Affairs.
 Conclusion
Every time we use lie as an instrument to win
our way towards our goal, we fail to
comprehend how it will hurt us in the long
run. The Satyam fraud case is no exception to
the quote. It unveiled the potholes that
existed in the corporate governance of our
country.
India learned a lot from the Satyam fraud
case. Indian laws are still developing. A
fraud like that has a little probability to take
place again.
More scandals like Satyam can be
avoided if:
• If auditing firm is honest.
• SEBI plays an active role.
• Periodic review of legal compliance
reports by independent directors.
• Corporate Governance needed to be
stronger and having transparency as a
culture through out the organization.
 Ref. Materials
1. https://blog.finology.in/investing/satyam-scam
(accessed on 24/6/21)
2. https:/slideshare.net
(accessed on 24/6/21)
https://www.slideshare.net/RaunakBiswas1/satyam-scam-full-ppt-194363106 (accessed on
24/6/21)
3. https://www.google.com/amp/s/blog.ipleaders.in/corporate-governance-india/amp/
(accessed on 24/6/21)
4. https://en.m.wikipedia.org/wiki/Satyam_scandal
(accessed on 24/6/21)
5.
https://www.google.com/amp/s/www.livemint.com/Companies/MlHLDsDKRemhosyPuGgduL/Cor
porate-excellence-award-to-be-taken-away.html%3ffacet=amp
(accessed on 24/6/21)
6. https://
www.bloombergquint.com/amp/markets/best-companies-in-india-indias-best-governed-compani
es-list-has-three-new-entrant

(accessed on 24/6/210)