The Satyam Fraud: Investigations and Implications Regarding Corporate Governance, CEO/CFO, and Fiduc

Background: Investigation and Charges Against Various Parties

The Satyam fraud has highlighted the multiplicity ofregulators, courts and regulations involved in a serious offence by a listed company in India. The investigation that followed the revelation of the fraud has led to charges against several different groups of people involved with Satyam. Indian authorities arrested Mr. Raju, Mr. Raju‘sbrother, B. Ramu Raju, its former managing director, Srinivas Vdlamani, the company‘s head of internal audit, and its CFO on criminal charges of fraud. Indian authorities also arrested and charged several of the company‘s auditors (PwC) with fraud. The Institute ofChartered Accountants of India (ICAI 2009) ruled that ?the CFO and the auditor were guilty of professional misconduct.? The CBI is also in the course of investigating the CEO‘s overseas assets. There were also several civil charges filed in the U.S. against Satyam by the holders of its ADRs. The investigation also implicated several Indian politicians. Both civil and criminal litigation cases continue in India and civil litigation continues in the United States

 

 

The fraud committed by the founders of Satyam is a testament to the fact that ?the science of conduct is swayed in large by human greed, ambition, and hunger for power, money, fame and glory.? The culture at Satyam, especially dominated by the board, symbolized an unethical culture. Unlike Enron, which sank due to  ?agency‘ problem, Satyam was brought to its knee due to  ?tunneling‘ effect. All kind of frauds have proven that there is a need for good conduct based on strong ethics. The debacle of Satyam raised a debate about the role of CEO in driving an organization to the heights of success and its relation with the board members and core committees. The scam at Satyam brought to the light the role of CG in shaping the protocols related to the working of audit committee and duties of board members

 

From the case study in the PDF i had summarize this issue regarding the role of CEO/CFO/Corporate Governance also fiduciary duty. Satyam had problems with the role played by CEO and CFO. The rules of corporate governance presuppose that the company’s CEO/CFO guarantees the accuracy and honesty of the company’s financial statements. Unfortunately, Satyam’s CEO Raju and CFO Vadlamani did not perform their functionsproperly. Because of their illegal activity that resulted in hiding the true financial data, the company’s investors, stakeholders, and clients did not even guess about the catastrophic situation with the matters in Satyam.The company’s strategy and performance suffered from such wrongdoing of the major people in the organization. The whole strategy was built in a wrong way because no one knew that the numbers were not true, and no one could plan any actions aimed at improving the situation.

 

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