This case pertains to the corporate governance failure at Satyam Computer Services in 2009. Satyam was one of the largest IT companies in India but its former CEO, Ramalinga Raju, falsified the company's financial statements by creating fake invoices and bank statements to inflate revenues and profits. After the scandal was revealed, the government took action against those responsible. There were major implications for Satyam, including difficulty retaining clients, threats from competitors, and its acquisition by Tech Mahindra. The scandal highlighted the need for stronger corporate governance policies and oversight of companies in India.

1. BUSINESS ENVIRONMENT
Submitted to – Submitted By –
Dr. Vandana Bharti KANCHAN SHARMA
KRATIKA PAPRPYANI
VANSHIKA KHANDELWAL
MAYANK ADHAULIYA
SHAHRUKH KHAN

2. TOPIC
Corporate governance failure at
Satyam Computer services.

3. INTRODUCTION
• The Satyam Computer Service Limited was founded in 1987. It was one of the
big four IT Companies in India with $2.1billion dollar revenue.
• The former CEO & Chairman of Satyam Computer is B. RAMALINGA RAJU.
• In 2005, it was ranked 3rd in Corporate Governance Survey by Global
Institutional Investors.
• In 1997, it was selected by the World Economic Forum as one India’s
remarkable and rapidly growing entrepreneurial companies.

4. How Ramalinga Raju cheated the world?
He cheated the world by following reasons:
• FALSE REVENUES – After generating the fake invoices, these were
entered into the company’s financial statements, boosting revenue and
profits, there were 7,561 invoices in, which worth Rs.5,117 crore were fake.
• FALSIFIED BANK STATEMENTS – The Senior management then ensured
that these false invoices were shown as cash receipts to this, they did it by
forging statements.

7. Q. What issues does this case pertain to and what is
this case about?
• Satyam Scam was the big corporate scam that occurred in India in 2009.
• Satyam computers was one of the fastest growing company of India hence,
Satyam computers as well as Ramalinga Raju received many awards during
growth years.
• During same period real estate was on boom.
• Raju aggressively started buying land properties in Hyderabad and nearby
areas.
• Raju was in short of funds. He manipulated the financial statements of Satyam
computers.

8. • Due to this fake rapid growth and strong financial price of share, Satyam
was growing rapidly. Raju opened 365 companies to buy the properties.
• Due to recession in 2008, the rates of properties decreased drastically and
Raju's plan of selling properties at high rate failed.
• Satyam acquired the two companies; Maytas properties and Maytas infra
but in real there were no cash transaction so as to balance fake figures and
actual figures in accounts of Satyam.

10. Q. What are the implications at Satyam of the corporate governance failure?
• Satyam faced difficulty in retaining clients and threats from competitors.
• Second implication was Threat of takeover and takeover by Tech Mahindra.
• The critical role of independent directors.
• Satyam couldn’t retain its contracts worth US$ 500 million and all of its
major clients moved to TCS
• Satyam’s collapse triggered a crisis of trust and the whole Indian industry
suffered form investors who reviewed their outsourcing programs.

11. STAKEHOLDER
Shareholders
Employees
Clients
Bankers
Government

12. After the scandal revealed, the government took action
towards all major persons responsible in the affair and
went even further by recruiting new independent
directors.
Questionable role of international auditors.
Ruin company image and its impact on the Indian IT sector.

13. Q. What were the sequence of events after the satyam
scam?
On Dec 16,2008 the Satyam’s board meeting took placed to consider a
proposal for diversification into real estate.
Ramalinga Raju said at the board meeting: “If a company took a huge
liability or acquired unrelated assets, it would automatically put off a
potential investor from mounting a bid.”
Raju announced that the board of satyma had approved the purchase of
100%stake in maytas property and 51% in infrastructure on an investment
of $1.3 billion and $0.3 billion respectively.

14. • The ADR was declined from $12.55 to $5.70 domestic share
was fallen by 30% to Rs.158.05.
• The investor outrage was immediate. The Satyam stock fell the
next day.
• The board reconvened the next day and called off the proposed
investment. The incident however did not cool off. Analyst put
sell recommendation on the stock.

15. Q. Are there any lessons to be learned for future prospectus of
corporate governance?
• The Indian Ministry of Corporate Governance , in consultation with the other ministries
needs to formulate a a national policy on corporate governance.
• No committee or any other category of directors should be allowed to be part of the
audit committee , and at least one of the members should be financially literate.
• The audit committee should ensure that management has minimum risk management
capability and that auditors don not get any consulting assignments from company.
• There is a need to improve the selection of directors on the board of companies the
recruitment and selection process is critical otherwise, the effectiveness of boards is
not achieved.

16. • External Evidence In Audit – Rules to be strengthed so as
to ensure that the auditors rely on external evidence
obtained by them
• Increased Financial Accounting Disclosures - The SEBI
also recently proposed requiring companies to disclose
their balance sheet positions twice in a year.

17. CONCLUSION
• Scandals like Satyam can be avoided if-
1. If auditing firm is honest
2. It Must confirm balances in various accounts.
3. It must not rely on management completely.
4. SEBI plays an active role-
5. Accurate check of financial reports.
6. Strict corporate governance laws.