Satyam Computers' Corporate Governance Fiasco (H): One Year After
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Code : GOV0045
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Region : India |
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Introduction: Satyam Computers Limited (Satyam) was a leading global business and Information Technology (IT) services company, delivering consulting, systems integration and outsourcing solutions. It began its journey with 20 employees in 1987 and grew to become the fourth-largest software company in India with a market capitalisation of $3 billion (INR 15,262 crore) and $2.1 billion revenues in 2008.1 Over a period of two decades, the company built a highly skilled employee base of 53,000 and was an attractive IT outsourcing destination for a number of multinational companies across the world. It was given the Golden Peacock Global Award2 twice for its excellence in corporate governance in 2002 and 2008 by the World Council for Corporate Governance. The Golden Peacock Global Award was one among the several honours received by Satyam for corporate governance. It rated the company with Best Corporate Governance Practices by Investor Relations Global Rankings (IRGR) in 2006 and 2007. Ironically, 3 months after Satyam received the Golden Peacock Global award in 2008, Ramalinga Raju (Raju), founder and chairman of Satyam confessed fudging the accounts books of the company to the tune of INR 7,800 crore. After the government changed the management, Satyam was taken over by Tech Mahindra (TechM) and was renamed Mahindra Satyam (Msat). It addressed the customers’ and employees’ issues very effectively; yet, even after a year of the takeover, Msat continues to face a hoard of legal and financial hurdles in stabilising the business. Lack of re-instated financial statements has been posing tough situations for Msat to bag contracts. The Satyam saga poses a question whether the government should bailout such companies when they reach a dead end due to financial bankruptcy or moral bankruptcy resulting in financial bankruptcy endangering the very economic and corporate image. |
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