Governance Failure At Satyam

Topics: Board of directors, Byrraju Ramalinga Raju, Corporate governance Pages: 2 (575 words) Published: March 20, 2015
 It was like riding a tiger, not knowing how to get off without being eaten B. Ramalinga Raju
When Ramalinga’s once in a life time quote become public, somebody ridiculed – he should have figured out ‘the get off without being eaten’ problem before getting on the tiger. But then the other said –‘did not he know from the start that it was a tiger?’

The problem with ethics in business, or in more open words, the problem with fraud in business is that people know that they are coming fraud but they are too much self-absorbed to know that they would be caught. The case Satyam fraud was an eye opener for everyone who has a part to play in the business chain – the promoters, employees, auditors (both internal and external), customers, shareholders, board-members, executives, creditors, institutional banks, regulatory bodies and even the Government. Just because regulators and Government were not directly linked to the functioning of the company they cannot deny that they were faultless or knew nothing or were not supposed to know anything.

Satyam case especially shouts out loud this same point. Satyam failed because none of its link in Satyam –business chain thought it was his/her responsibility to proactively look into the black smoke passing over the Satyam. Or at least, everyone was so sure of their success story and busy in making of Satyam that nobody was lousy enough to check what is going at the backstage.

Satyam failure can be classified into four major errors:
a) Related party transaction: Investopedia defines related party transaction as “A business deal or arrangement between two parties who are joined by a special relationship prior to the deal.” Usually in business any such deal should raise suspicion and call for background check. The case of Satyam trying to acquire Maytas Infra was one such case that no one looked into. In India section 188 of the Companies Act, 2013 now take cares of such mishaps. b) Obligations...
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