Abstract

The case examines the corporate governance issues at the India based IT services company, Satyam Computer Services Limited (Satyam). 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 (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 Due to adverse reaction from institutional investors and the stock markets, the deal was withdrawn within 12 hours.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 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, 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.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Study the corporate governance structure that existed at Satyam Computers
• Appreciate the importance of Code of Conduct and Whistle-blower policy of a company
• Examine the roles and responsibilities of a company’s board and independent directors
• Critically analyze the instances where the independent directors failed to fulfill their responsibilities
• and Understand the limitations of independent directors in Satyam’s case.

Keywords

Satyam Computers, Corporate Governance, Maytas, Maytas Infra, Maytas Properties, Independent Directors, Ramalinga Raju, Board of Directors, Accounting Fraud, Acquisition, Golden Peacock Global Award, Audit Committee, Compensation Committee, Whistleblower Policy, Code of Conduct , India's Enron