Corporate Governance Issues at Satyam Computers

Authors: Gupta, V.; Indu, P.
Source: ICMR Center for Management Research
Year: 2009
Company Name: Satyam Computers
Number of pages: 19

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This case examines the corporate governance issues at the India-based IT services company, Satyam Computer Services Limited. In mid-December 2008, Satyam announced acquisition of two companies - Maytas Properties and Maytas Infrastructure owned by the family members of Satyam's founder and Chairman Ramalinga Raju. Due to adverse reaction from institutional investors and the stock markets, the deal was withdrawn within 12 hours.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. 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 the past several years. 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, and 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.

This case is designed to enable students to: (1) study the corporate governance structure that existed at Satyam Computers; (2) appreciate the importance of the code of conduct and whistle-blower policy of a company; (3) examine the roles and responsibilities of a company's board and independent directors; (4) critically analyse the instances where the independent directors failed to fulfill their responsibilities; and (5) understand the limitations of independent directors in Satyam's case. This case is meant for MBA / MS students as part of the corporate governance / controversies curriculum. The teaching note includes: (1) the abstract; (2) the teaching objectives and methodology; (3) assignment questions; (4) feedback of the case discussion; and (5) additional readings and references. The teaching note does not contain an analysis of the case.

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