Mahindra Satyam: Restoring Corporate Governance Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

INTRODUCTION:

Satyam Computer Consultancy Limited was established on June 24 1987. Mr.Ramalinga Raju was the initiator and chairman of this company.The company came into being to provide services in the IT sector/industry. The company progressed with rapid leaps and bounces and expanded enormously in this era. The organization became India`s fourth largest software developer and service provider in the Information Technology Industry of India.The organization housed a vast and massive population of human resource of it professionals, it had employed roughly 53000 professionals, which were spread at its numerous facilities.

The chairman resigned from his position after the scam was found out and became public.Initially,it was presided over by a six member standing committee which was appointed by the government, but later in April of the same year the company was acquired by another power house of the IT Industry of India namely Tech Mahindra as it bought the majority shares of the company and thus, renaming it later as Mahindra satyam.

The company was headquartered in Hyderabad, India. Mr. Ram Mynampatiwas the chief executive officer and Mr.Valdamani Srinivas was the chief financial officer of the organization subsequently.On the other handKrishna Palepu and VinodKDham were the non-executive directors of the company at the time of the scam.

After procurement of the company to the Mahindra group, Rakesh Soni was appointed as chief compliance officer (CCO) of the Mahindra Satyam Ltd. Thetask for which he was appointed was to eradicate the issues that create hurdles in the corporate governance of the company and avoid the scams and frauds of the past.

His role was to establish a relationship among shareholders in a way that this relationship was used to adopt and control strategic direction and performance of the company and the best possible practices and strategies are adopted and the policies and decisions implemented should only be concerned with the progress of the organization. The governance should showan increase the sense of understanding among the shareholders and the organizations top-level hierarchy and managers.

CASE SUMMARY:

The case observes the corporate governance issues at the India based IT services company, Satyam Computer Services Limited (Satyam). In mid-December 2008, Satyam declared acquisition of two companies - Mayas Properties andMaytas Infrastructure possessed by the family members of Sat yam’s founder and Chairman Ramalinga Raju (Raju). It intended to acquire 100% and 50% shares in May tas property and infrastructure for $1.6B. Due to opposing reaction from shareholders/investors and the stock markets, the deal was reversed within 12 hours. Reservations were voiced on the corporate governance application of Satyam with experts and investors enquiring the company's board on the motives for giving approval for the acquisition as it was an associated party transaction.

After the deal was cancelled, four of the noticeable independent directors resigned from the board of the company. In early January 2009, Raju discovered that the revenue and profit figures of Satyam had been tempered for past several years and after comprehensive investigation the following findings were revealed:

Overstated cash and bank debits by Rs.5040cr.
Absence of accrued interest amounting upto Rs376cr.
Liabilities were understated by Rs.1230cr.
Debtor position of the company was inflated by Rs.490cr.
Actual staff was around 40000 and was also over stated in the records by 12000.
Actual revenue was Rs2112cr and was also overstated by 588cr rupees.
Operating profit was also overstated in the company`s financial records.

According to the definition of corporate governance discussed above in the introduction,are spectable corporate governance is one where a firm commits & adopts ethical procedures across its complete business activities and above all in dealing with a wide group of stakeholders including employee, customer, vendors, regulators & shareholders in both comfortable and uncomfortable circumstances and conditions.Corporate governance covers all aspects of the organizational hierarchy:

1)Shareholders/ investors

2)Employees/ staff

3)Management/ board of directors

4) Bankers/creditors

5)Government

Mahindra Satyam Restoring Corporate Governance Case Solution

The grave corporate governance problem at the organization ascended because of non-fulfillment of commitments of the company towards the investors/stakeholders. The management of the company had a poor synergy with all the stakeholders.It is the right of a shareholder by law to get information from the organization on the activities of the business. These activities could be about anything or any policy that the management adopts as they have the right to demand answers. Shareholders anticipate transparent dealing in an organization;they even have the authority to get the financial statements and records..........................

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