Downfall of Satyam: One of the Biggest IT Giants in India
Synopsis
This case illustrates the downfall of Satyam, one of the biggest IT giants in India, because of the fraudulent activities carried out by its founder Mr. Ramalinga Raju and his associates. Business world at that point had garnered immense respect for Satyam in terms of risk management and corporate governance practices and Satyam was ranked as the fourth largest IT Company in India. This was the case before December 16, 2008, when Satyam promoter Mr. Ramalinga Raju proposed his intent to acquire Matyas Infra and Matyas Properties. When this announcement of acquisition reached to the public, investors had a tremendously negative reaction towards Satyam’s decision. Satyam founder eventually admitted fraud in a financial statement revealing that he had been cooking the books of Satyam for quite some time. Raju and his team manipulated cash balance, bank balance, accrued interest figures, overstated debtors and understated liability in order to manipulate the share prices of the company in the market by misleading its investors and the public.
After admission of fraud, share prices of Satyam sharply fell down and Satyam was eventually removed from the New York stock exchange and the Bombay stock exchange. The US investors initiated several class action suits against Satyam for its fraudulent activities and top executives of Satyam were charged with violation of federal securities laws by issuing false and misleading financial statements. The Satyam scandal has shaken the roots of the Indian financial market and has put a big question mark on corporate governance and how far corporations (people) can go to enhance their own personal benefits.
Major Issues in the Case
Corporate governance
Satyam failed to follow the corporate governance practices that every firm was meant to follow, it looked for loop hopes that could be tweaked to enhance the company’s profit and hide liabilities from the investors as well as the general public. The Satyam Board was
This case illustrates the downfall of Satyam, one of the biggest IT giants in India, because of the fraudulent activities carried out by its founder Mr. Ramalinga Raju and his associates. Business world at that point had garnered immense respect for Satyam in terms of risk management and corporate governance practices and Satyam was ranked as the fourth largest IT Company in India. This was the case before December 16, 2008, when Satyam promoter Mr. Ramalinga Raju proposed his intent to acquire Matyas Infra and Matyas Properties. When this announcement of acquisition reached to the public, investors had a tremendously negative reaction towards Satyam’s decision. Satyam founder eventually admitted fraud in a financial statement revealing that he had been cooking the books of Satyam for quite some time. Raju and his team manipulated cash balance, bank balance, accrued interest figures, overstated debtors and understated liability in order to manipulate the share prices of the company in the market by misleading its investors and the public.
After admission of fraud, share prices of Satyam sharply fell down and Satyam was eventually removed from the New York stock exchange and the Bombay stock exchange. The US investors initiated several class action suits against Satyam for its fraudulent activities and top executives of Satyam were charged with violation of federal securities laws by issuing false and misleading financial statements. The Satyam scandal has shaken the roots of the Indian financial market and has put a big question mark on corporate governance and how far corporations (people) can go to enhance their own personal benefits.
Major Issues in the Case
Corporate governance
Satyam failed to follow the corporate governance practices that every firm was meant to follow, it looked for loop hopes that could be tweaked to enhance the company’s profit and hide liabilities from the investors as well as the general public. The Satyam Board was
References: * Investopedia, Business Ethics. Retrieved from http://www.investopedia.com/terms/b/business-ethics.asp (Accessed on 15th June 2013) * Wikipedia, Principle-Agent Problem. Retrieved from https://en.wikipedia.org/wiki/Principal_agent_problem (Accessed on 15th June 2013) * Wikipedia, Corporate Governance, Retrieved from http://en.wikipedia.org/wiki/Corporate_governance (Accessed on 15th June 2013)