CORPORATE ETHICS AND GOVERNANCE

CASE-WHAT WENT WRONG WITH THE SATYAM?

Group members-
Akshay Huilgol(65)
Ashish Khurana (72)
Deepane(75)
Rahul Varma(91)
Kunal Shah(81)
Rajat Goyal(113)
 ABOUT RAMALINGA RAJU

Born on September 16,1954 in a family of farmers

He completed his B.com from Andhra loyala college at
Vijayawada
He earned an MBA degree from Ohio university, USA
After returning to India in 1977 he started spinning and
weaving mill named Sri Satyam
He shifted to real estate business named Satyam
constructions
In 1987 Raju founded Satyam computer service with one
of his brother in law DVS Raju
 ABOUT SATYAM
Established on 24th June 1987
Was incorporated in 1991 as public limited company
Period of 1997-2003 was of very high growth
Mr. Raju was awarded with many honours

Downfall of Satyam :
In Dec. 2008 World Bank blacklisted Satyam on the
charges of

Providing Improper benefits to staff

Data theft
Bribing the staff

On January 7, 2009 Mr. Raju confessed the

wrongdoing in a letter issued to its board directors
admitting fraud !
 WHAT CRIME HE HAS CONSTITUTED?
1. Raju and his brother, B Rama Raju, were arrested by the
Andhra Pradesh police on charges of breach of trust,
conspiracy, cheating, falsification of records.
2. Raju has mislead various investors.
3. Raju had also used dummy accounts to trade in
Satyam's shares.
4. He has violated the insider trading norm.
5. Funds from Satyam were diverted to Maytas
6. On 22 January 2009, CID told in court that the actual
number of employees is only 40,000 and not 53,000 as
reported earlier and that Mr. Raju had been allegedly
withdrawing INR 20 crore rupees every month for paying
these 13,000 non-existent employees.
7. Ten Imaginary fixed deposits Raju admitted that Satyams
fixed deposits which supposedly grew from Rs. 3.35 crore
in 1998-99 to a massive Rs. 3320.19 crore in 2007-08 are all
fake.
 Relation with Maytas
Maytas refers to a group of companies founded by
B. Ramalinga Raju. It includes Maytas Properties and Maytas
Infra Limited.
A property development company founded in 2005.
Maytas Infra Limited: An infrastructure development, construction
and project management company. Maytas Infra was originally run
by Satyam Computer Services founder B Ramalinga Raju.
It came under the scanner due to its association with B. Ramalinga
Raju.
Various agencies, including the state Crime Investigation
Department, probed the Maytas affair after B Ramalinga Raju
admitted to serious financial scam in Satyam Computer.
There were allegations that funds from Satyam were diverted to
Maytas, causing the Government agencies to verify the
infrastructure companys records as well. .
 THEORIES AND APPROACHES

1. Kohlberg Model
Post conventional Stages:
- Stage Five: Social Contract Orientation
- Stage Six: Universal Moral Principles Orientation
Board of Directors
- Stage One: Interpersonal Concordance Orientation
2. Theory of Universalism
Universalism suggests that in reaching a decision,
consider if the decision would be acceptable if everyone, in
every situation, made the same decision.
3. Peter Drucker model
Above all, do no harm
 4. LAURA NASH MODEL
What are your intentions in making this decision?
How does these intentions compare with likely
results?
5. Utilitarian theory
moral actions are those that produce the greatest net
pleasure compared with net pain.
the CostBenefit Analysis
 ETHICAL ISSUES
INVOLVED

Not following corporate governance norms

Tampering the financial data
Misleading the shareholders fund
Putting self-interest at the expense of shareholders interests
 ETHICS IN
BUSINESS

Ethical choices are difficult for businessman because :

Bottom line is unforgiving in todays competitive business world
Pressure for results is much too higher
RECOMMENDATION FOR RESOLVING
DILEMMA
A THREE-STEP STRATEGY THAT SHOWS YOU HOW TO
COMBINE THEM.
STEP 1:MR. RAJU SHOULD HAVE ANALYSED THE
CONSEQUENCES OF HIS WRONG DOINGS.
HE SHOULD HAVE THOUGHT THE FOLLOWING QUESTIONS-
WHO WILL BE HELPED BY WHAT YOU DO?
WHO WILL BE HURT?
WHAT KIND OF BENEFITS AND HARMS ARE WE TALKING
ABOUT?
STEP 2: MR RAJU SHOULD HAVE ANALYSED HIS
ACTIONS
HOW DO THEY MEASURE UP AGAINST MORAL PRINCIPLES LIKE
HONESTY, FAIRNESS, EQUALITY, RESPECTING THE DIGNITY OF
OTHERS, RESPECTING PEOPLE'S RIGHTS, AND RECOGNIZING
THE VULNERABILITY OF INDIVIDUALS WEAKER OR LESS
FORTUNATE THAN OTHERS?
 Do any of the actions that you're considering "cross the line," in
terms of anything from simple decency to an important ethical
principle?
If there's a conflict between principles or between the rights of
different people involved, is there a way to see one principle as
more important than the others?
What you're looking for is the option whose actions
are least problematic.

Step 3: Make a Decision

After careful analysis of both the steps given above, one should go
for the one which, fits well into the situation.
 RECOMMENDATIONS TO AVOID
TRAGEDIES LIKE
SATYAM IN THE FUTURE.
The Satyam fiasco, makes it imperative that corrective measures
need to be taken at the earliest to stem the rot.
Government needs to set up a Board of Audit, is empowered to
conduct surprise audit or on complaints of whistle-blowers.
The same auditor should not be allowed to continue for more
than 3 years with a Company.
Cross-directorships must be banned.
Incentives should be provided to Whistle-blowers.
Laws should be made more stringent.
 RECOMMENDATIONS TO AVOID TRAGEDIES LIKE
SATYAM IN THE FUTURE.

The Department of Corporate Affairs should create a pool of

independent directors with high integrity and prescribe for them
adequate remuneration.
The conviction rate in corporate frauds, currently under a
pathetic 5 per cent, must be improved.
The law and administration should come down heavily on
breach of trust and fraud.
 CONCLUSION
Satyam scam is unparalleled in the corporate history of
India, and as some keen corporate observers point out, the world
itself.
The idea of a corporation, and the values and principles that
should guide its governance have hardly been imbibed by
promoters.
An careless administration, ill-equipped regulatory system and
terribly delayed justice delivery process only make things easier
for the corporate crooks to make a killing.
Corporate governance framework needs to be implemented in
letter as well as spirit. The increasing rates of white collar crimes
demands stiff penalties and punishment.
Creating an awareness of the large consequences of small lies
may help some to avoid this trap.
THANK YOU