Governance Failure at Satyam Case Solution
1.Role of Independent and Non-Executive Board Members
However, independent directors and non-executive board members are not directly interlinked with the daily operations of the company and neither did they take part in the management. As far they are concerned, they are responsible for the stakeholders of the company, as they were responsible in making sound decisions of the company.
In the case of SATYAM, the independent directors were promoted by the CEO and were appointed by them. The fraud case of the company would project over the CEO’s image as they were the part of organization where the scandal took place, which can create bad image for them in the business circle as well as in the society.
2.Changes in the Corporate Governance
4.1 Controlling and Monitoring
The controlling and monitoring system should be implemented properly, which can overcome such issues. The monitoring is not implemented in the operations, which is why the fraudulent report was maintained. Having the system controlled and monitored by the top management can decrease the false reporting.
4.2 Transparent Audit
Audit is the most important way to make your business transparent and fair. However, the audit must be done through the company’s management and the outsider organization, to check the annual operations of the firm. This can make the business profitable and would also help in detecting any fraudulent activity.
4.3 Increase Diversity
The other recommended aspect is that the company must increase its diversity because it’s the business rule;don’t keep your eggs in one basket, it means do not just invest in one business but diversify either in relevant or irrelevant businesses. SATYAM should invest in other businesses as well, so that if one sector gets in trouble so it can save itself by utilizing its business. By doing so, the company would not be able to just have profit maximization but it would also have its business expanded.
3.Recommendations
The basic laws must be imposed that aid the corporate governance for the SATYAM and help in overcoming any scandalous and fraudulent case.
5.1 Commitment should be the first priority
Commitment should be the first priority in capitalist business society, where the employees and the top management must be committed and sincere with the organization. The corporate governance must add this law in order to mitigate any fraudulent case. Moreover, it makes the employees to be sincere with their organization.
5.2 Accountability and Clear communication
The other important law that should be imposed is the accountability and clear communication within the organization. It brings transparency in the business operations, and the stakeholders must be given the correct information regarding the company’s financial position.
5.3 Alignment between the business and structure must be authoritative
The business structure must be sustainable and aligned, which can provide success and benefit to the organization. The business structure must be imperative in the contemporary business world, which creates productive performance.
6. Recommendations for Board of Directors
If I were the founder of any big organization or majority stakeholder; I would have suggest the board of directors to be the internal and external member of the organization and to must represent the both managements, internally and externally. Furthermore, they should lead the organization in such a way that would help the company in moving towards success. I would not have recommended those who do not scrutinize the company’s operations and annual reports. The efficient board of director is responsible for the company’s financial report to scrutinize and prevent from any scandals and fraudulent reports. They are involved in the management operations as well and provide strategic support rather than the operational support. They should be responsible to select the right person for the post of CEO, who would monitor and control the day to day operations of the company. They must ensure that the right information is prevailing about the organization and they should also evaluate their own performance and make development programs for the organization.................................
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