Ethics are one of the crucial base for having a strong setup of business. Their theoretical, as well as practical implications, can be seen today in our nearest business environment. Various laws have been framed which governs the rule of ethics in the business. The history behind forming these laws where some famous corporate or business scandals which had taken place in the business environment. One of them is of Satyam Computers Private Limited where the stakeholders have been duped on the basis of mutilated financial statements (Potts & Matuszewski, 2004).
Ethical issue involved and the ethical dilemma faced by the parties:
The case of Satyam Computer Services Limited is a well-known corporate case which have attracted worldwide attention similar to Enron. It involved the issue of breaking the norms of corporate governance by altering the financial statements for holding up personal interest of the founder at the cost of the shareholders. The founder A. Raju was worried regarding the fall in the market value of the company. This will further lead to losing the overall control from the company. In order to retain its control and to earn undue gains, the founders planned of compromising with the corporate governance in order to embezzle the property of the shareholders. In order to safeguard the control, lawful ways could have been adopted but due to the unethical behavior of the founder members along with the support of company’s auditors, they chose the wrong path at the cost of the company’s future (Bhasin, 2013).
Identification and evaluation of the stake holders that were impacted by the ethical issue:
Due to Satyam case, apart from the company, it has also affected its stakeholders. Right from its employees, shareholders and the economy of the country, all have been drastically affected due to this scandal. This case had become a major threat to the jobs of the employees of Satyam as they were highly at risk. If the company is itself a fraud, there is certainly a question of job security for the employees. The Information Technology sector of India at that time had faced a drastic and steep downfall which had polluted its image globally. The economy of India was moving towards its boom period prior to the Satyam case. Post this fraud, the nation’s Gross Domestic Product had fallen by around in the range of 0.3 % to 0.5% (Padgett, et al., 2013). The scam of Satyam has negatively affected its share price to the core. Post Raju’s confession regarding the fraud, the price of the company’s shares had fallen drastically to a negligible value. This has not only affected the Indian shareholders’ wealth but also the image of the companies existing in India for the purpose of investment among the foreign investors (Singh, et al., 2010).
Analysis of the decision based on ethics and its impact on the business:
The decision made by the involved parties in the Satyam fraud case was not at all ethical in any way. Though it took the form of an accounting scandal but its base was an outcome of the wrongful decision related to the ethics. As far as the founders are concerned, it is expected that they carry out their duties in favor of the company’s stakeholders. The management team of the company including its directors, all are expected to work for the growth and development of the business and not funding their own self-interest. Earning profits is not a bad motive but the way of earning them counts. The founders aimed for profits but in a wrongful direction which further lead to their fall down. The second party, i.e. the Satyam’s auditors, PWC had violated their code of conduct and ethics by supporting the founders in altering the financial statements (Singh, et al., 2010).
One wrong decision can cost a person almost everything. The similar thing happened with the Satyam Computers Private Limited. Its trading has been suspended both within and outside India. The auditors, as well as the alleged parties, were asked to pay heavy charges which accounted for committing the fraud (Brown, et al., 2014). The reputation of Satyam Computers Private Limited was standing nowhere post fraud and it had lost all its importance in the eyes of foreign investors worldwide. The share price crashed within a period of time and the existence of the company was under a question. In order to take the short cut route of earning high profit, the company faced its downfall by breaking the laws which further leaded to the non-existence of the business (Padgett, et al., 2013).
Comparing and contrasting the view on business ethics post attending the lectures and case assignment:
Business Ethics lays down ethical and moral guidelines which is required to be followed for surviving in the business environment. It helps in identifying the action as in what can be right and what can go wrong. Like, there exist many business corporations whose aim is to focus on the benefits and ignoring business ethics. My view of business ethics was confined to the academic purpose. I used to hardly find any practical implications of it in the business . But after attending the lectures, my views have certainly changed a lot. I have learnt that the area of business ethics is quite exhaustive and is not really confined to the academic domain. After analyzing the case of Satyam, I have actually acknowledged the importance of business ethics in our business environment. Previously, I used to think it of as an academic content but today, I have found its practical implications as well. I was unaware of its depth but after analyzing the cases, I have found that by nit following the business ethics, it can cost you your job, your reputation, your business and even your existence in this business world (Craig, et al., 2013)
Today, the role of business ethics has diversified a lot and applies right from the small business to the large corporations. Satyam’s fraud case is an iconic example which explains the irony of non-fulfilling the needs of business ethics. The business should maintain its balance of profits, security and business ethics. By promoting honesty and fairness in the business, greater success can be achieved (Bews & Rossouw, 2002).
Bews, N. & Rossouw, G., 2002. A Role for Business Ethics in Facilitating Trustworthiness. Journal of Business Ethics, 39(4), p. 379.
Bhasin, M., 2013. Corporate Accounting Scandal at Satyam: A Case Study of India's Enron. European Journal of Business and Social Sciences, 1(12), pp. 25-47.
Brown, V. L., Brian, D. & Julie, P., 2014. Satyam fraud: A case study of India's Enron. Issues in Accounting Education, 29(3), pp. 419-442.
Craig, R., Mortensen, T. & Iyer, S., 2013. Exploring top management language for signals of possible deception: The words of Satyam’s chair Ramalinga Raju.. Journal of Business Ethics, 113(2), pp. 333-347.
Padgett, D. R. G., Shuhui, S. C. & Parekh, V., 2013. The quest for transparency and accountability: Communicating responsibly to stakeholders in crises. Asian Social Science, 9(9), p. 31.
Potts, S. & Matuszewski, I., 2004. Ethics and Corporate Governance. Corporate Governance: An International Review, 12(2), pp. 177-179.
Singh, J., Kumar, N. & Uzma, S., 2010. Satyam fiasco: Corporate governance failure and lessons therefrom. IUP Journal of Corporate Governance, 9(4), p. 30.