Satyam Scam in the Contemporary Corporate World: A Case Study in Indian Perspective

Abstract

Satyam scam has been the greatest scam in the history of corporate world of the India. Satyam is the fourth largest IT Company in India. The CEO of the company Ramlinga Raju has made a scam of around $2 billion. There has been a lot of controversy regarding the misuse of the post by the CEO of the company. The fake number of jobs which was shown by the CEO was an abuse of power and it was a clear violation of the prevailing laws in India. This gives the impression that in India the power and position is what matters and the people in the top position make a clear violation of the rights provided to them. This scam has seriously affected the corporate bodies in India. The role of an incorporated company is to satisfy desires of investors, and to channelize their investment. But most of the time entrepreneur’s play with money of the investors. There are laws to safeguards investors’ interest but the Satyam scam has raised the question on the fundamental role of the government and corporate governance. On 16th December, 2008 Satyam board got the approval for acquisition of Mayta’s Infrastructure and Mayta’s Properties (companies owned by his relatives). However the company couldnot go on with the investment plan due to resistance by the investors. Between 25th and 28th December, 2008, 3 independent directors of Satyam board resigned and later on Mr. Raju confessed to fraud in the form of misappropriation in the balance sheet of the company. The main objective of the paper is to analyze relevance of corporate law in contemporary world and whether it is a time to revisit corporate governance. Further our research will throw light on liabilities of Mr. Raju as a promoter and a director, whether Memorandum of Association and Article of Association authorized the Satyam to purchase an infrastructure company. The liabilities of Auditor and Bankers for facilitating Mr. Raju. Whether the role of independent directors of Satyam was justified. An effort will also be made to analyse the Satyam case in the context of other developed countries law. We will impress upon that to help independent directors and to improve corporate governance, an independent body could be set up, which would be engaged in continuous training and certification and upgrading and disseminating corporate governance best practices. More powers should be vested in Securities Exchange Board of India and it may be converted into commission like U.S.A.

Keywords: corporate governance, SEBI, SEC, auditors, director