Satyam Computers Corporate Governance Fiasco (D): Government Intervenes, Perplexity Prevails
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Code : GOV0036
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Region : India |
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A Fairy Tale Gone Sour The fairy tale of Satyam began in 1987 founded by Ramalinga Raju along with his kin D.V.S. Raju and 20 others in Hyderabad, the capital city of Andhra Pradesh, a South Indian state. Capitalising over the opportunities of the emerging IT field, Satyam got associated with a Fortune 500 client John Deere & Co. in 1991 for an offshore software project and became a public limited company by getting listed on Bombay Stock Exchange (BSE) in the same year. The next year it became the first ever firm in India providing 64kbps satellite link for online access to global clients. In 1993, it established Satyam Technology Centre (STC), upgraded its operations in compliance with international standards for which it was awarded the ISO 9001 Certification and entered into another joint venture with the multinational technology and services conglomerate, General Electric Co... Can Confession Help Ramalinga Raju? Why did Mr B. Ramalinga Raju, founder of Satyam Computer Services, choose to confess? Perhaps, he might have thought that it would not be long before his misdeeds were exposed. The other aspect the legal experts are considering is whether it would help escape with lesser penalties. A lot of thinking went into the decision to make a confession when things came to a pass — either he had to disclose or the possible valuation by suitors would have revealed it any way. Of all the options, confession was zeroed in on... Government Takes Over the Governance As the shrouds of disgrace started surrounding corporate India, government and regulatory bodies took initiative and intervened into the corporate affairs directly to prevent the spread of the ramifications. On January 7th 2009, the Indian Minister for Corporate Affairs, Prem Chand Gupta (Gupta), ordered the Registrar of Companies (RoC) to probe into the ‘financial irregularities’ proclaimed by the disgraced Ramalinga Raju and to submit a report within a week. It was reported that once Gupta received the RoC report, he might refer the case to the Serious Fraud Investigation Office (SFIO)... |
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Government Intervention In a positive move to boost investor confidence, the Indian government announced the constitution of a new 3-member independent board for Satyam on January 11th 2009, to steer Satyam out of the crisis. Despite Company Law Board’s (CLB) permission to appoint a 10-member board, government had placed only three people– Kiran Karnik, and C. Achuthan, former SEBI member and an expert in law and the chairman of HDFC, Deepak Parekh. Government also announced its intention not to interfere in the day-to-day business of Satyam or its new board, which was assigned complete freedom ‘to take the final call on important issues’. The first meeting of the new board was convened on January 12th 2009...
