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Corporate Governance Case Studies Catalogues PDF
Corporate Governance Case Studies Catalogues PDF
CORPORATE
CORPORA GOVERNANCE
TE GO VERNANCE & BUSINESS ETHICS
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Satyam Computers Corporate Teaching Note Available Ramalinga Raju and debate on the
Governance Fiasco (D): Struc.Assign. Available expected fallout of his arrest
Government Intervenes, Keywords • To examine and suggest all the possible
Perplexity Prevails options (in the light of the CEO’s arrest),
Satyam Computer Services, Corporate before:
This case study, fourth in the Satyam Governance, Satyam-Maytas Deal, Role of
Computers Corporate Governance Fiasco Independent Directors, Shareholder The company and its top management;
case series, addresses an interesting question: Activism, Corporate Frauds in India, CEO
should the Government of India have Confession, Ramalinga Raju, Maytas The regulatory authorities; and
intervened by disbanding Satyam's board The government.
and constituting an interim board?
Presenting a comprehensive look at the Industry Information Technology
Satyam Computers Corporate Reference GOV0035
previous three cases covering the events
leading up to the resignation and arrest of Governance Fiasco (C): CEO Year of Pub. 2009
the celebrated CEO of Satyam Computers, Confesses, Company Collapses Teaching Note Available
B. Ramalinga Raju, this case study focuses Struc.Assign. Available
Third in the Satyam Computers’ Corporate
mainly on the events that occurred Governance Fiasco case study series, this Keywords
between January 11th 2009 and February case study captures the events that occurred
5th 2009. between January 7th 2009 and January Satyam Computer Service, Corporate
10th 2009. On January 7th 2009, very Governance, Satyam, Maytas Deal, Role
With the vacuum created by the arrest of
surprisingly the CEO, B. Ramalinga Raju of Independent Directors, Shareholder
the disgraced head of Satyam Computers,
released a press statement confessing that Activism, Corporate Frauds in India, CEO
B. Ramalinga Raju, government intervened
the books of accounts were tampered with Confession, Ramalinga Raju, Maytas
to protect the tottering image of India Inc.
It abolished the existing board only to and the income figures in the last few years
replace it with an independent one having were inflated. More interesting, rather
constituents nominated by the amusing, was his admission that no one Satyam Computers Corporate
government. This case study looks into else was involved in this entire episode and Governance Fiasco (B): The
the working of the new board and examines taking the onerous responsibility on Role of Independent Directors
all the decisions taken by it to save the himself. And this confession triggered off
firm from the present turmoil by restoring a series of events resulting in the arrest of Second in the series of Satyam Computers
confidence among the employees, clients B. Ramalinga Raju on January 10th 2009. Corporate Governance Fiasco, this case
and investors. The case also discusses the study inquires, if the fiduciary duties of
Debacle at Satyam Computers proved that independent directors on Satyam board were
prevalence of perplexity over the the rewards, recognition and accolades for
appointment of new CEO and CFO amid duly discharged. This case enables a debate
following the best practices in corporate on whether the independent directors have
speculations over a possible bailout of the governance by themselves are not ultimate
firm and a possible takeover of the deviated from the spirit of the corporate
proof of corporate governance principles governance norms, particularly in a
company either partial or in full. Raising being practiced in letter and spirit.
questions over the timing of governmental company that is renowned for receiving
However, one question remains the Golden Peacock Award for Excellence
intervention, this case study debates the unanswerable. When the CEO assumes the
rationale behind the governmental move in Corporate Governance more than once.
entire responsibility in a corporate
albeit against the liberalism policy and the governance fiasco absolving everyone else The independent directors are expected to
efficacy of its interference. (family members, board of directors, function on behalf of the shareholders and
independent directors and other top investors to protect their interests. Their
Pedagogical Objectives management people), how should the duties fall under two broad categories: the
• To have an overview of the events at regulatory authorities and the government duty of loyalty to the shareholders and the
Satyam Computers that have caused so proceed against the CEO who has confessed duty of taking utmost care in approving
much trauma and panic within India as and other people who were absolved by any proposals of the management of a
well as throughout the world with the him. As The Economist observed, “when firm. Had the independent directors not
arrest of its celebrated CEO, by a liar confesses, can you believe him?” derelict the true spirit of their fiduciary
juxtaposing the previous three cases' duty, Satyam Computer Services Ltd. would
learning Pedagogical Objectives: not have got into the turmoil. Thanks to
the Shareholder activism, without which
• To understand and debate the decisions The case attempts to achieve the following the biggest corporate governance fiasco in
taken by the newly appointed (by the pedagogical objectives: India would not have had surfaced even till
Ministry of Company Affairs, • To have an overview of the events date. It raises several doubts over the role
Government of India) governing body concerning the (un)holy deal between of the Board of Directors and the integrity
and analyse the implications of those Satyam and Maytas and the resultant of independent directors on the Satyam
decisions for Satyam Computers eruption of Satyam's corporate Board. Satyam is really the hardest case
immediate future, in the short- and long governance fiasco for India in the known times, but one
term should not forget the well-known legal
• To examine, critically evaluate and phrase, “Hard cases make bad law”.
• To understand the nature of growing debate on the CEO’s confession letter, Satyam’s case highlights the need of the
perplexity both for the appointment of especially from the point of view of hour to make corporate governance laws
the new and full-time CEO and also the absolving all the others including the top more effective to achieve more
probable big stake investor which can management, board of directors and the transparency and accountability to prevent
take over the company family members, from any of the the repetition of unfavourable events in
Industry Information Technology accumulated corporate wrongdoings the corporate houses of India.
Reference GOV0036
• To have an understanding of the events
Year of Pub. 2009
leading up to the arrest of Satyam’s CEO,
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Pedagogical Objectives: • To analyse the factors that forced • To debate and suggest on the possible
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Satyam Computer Services into the ways and means to arrest corporate fraud
The case attempts to achieve the following current crisis. menace in India and to examine the
pedagogical objectives: efficacy of the steps already taken.
Industry Information Technology
• To understand the relevance and the Reference GOV0033 Industry Not Applicable
importance for the companies to adhere Year of Pub. 2009 Reference GOV0032
to corporate governance norms Teaching Note Available Year of Pub. 2009
• To understand the roles and Struc.Assign. Available Teaching Note Available
responsibilities of independent directors Struc.Assign. Available
Keywords
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in the functioning of any corporate Keywords
Board Ramalinga Raju , Corporate Governance,
Satyam Computer Services, Shareholder Business Ethics, Corporate Frauds, Whistle
GOVERNANCE
• To delve and debate on the circumstances Activism, Satyam, Maytas, Role of Blowing, Governance, Internal Audit,
leading to Satyam Computer Services Independent Directors, Corporate Frauds Management Control, Internal Control,
Ltd. corporate governance fiasco in India, Mergers and Acquisitions, Business Outsourcing, BPOs, Management Audit,
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insurance and financial services companies agreed to certain conditions until December would dampen the industry’s growth rate.
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with operations in more than 130 countries. 2006, no criminal charges would be levied Future growth prospects of the industry
After the announcement of its financial against the firm and KPMG could escape depended on its ability to retain customers
results for 2004-05, AIG was charged by the with mere penalties. and to convince prospective clients about
US regulators for indulging in manipulative its competence and expertise in handling
accounting from the year 2001. It was alleged The case gives an account of the important security issues.
that AIG along with its subsidiaries, had tax shelter products of KPMG and
highlights the details of the litigation
resorted to creative accounting to give a
against the firm. The case aims to analyze Pedagogical Objectives
false picture of its clients’ earnings as well
as that of its own. After the complaints, whether the regulatory authorities were • To understand about the BPO industry
TE GO
AIG conducted an internal review of its correct in protecting KPMG from criminal in India
accounts and came up with a restatement charges and whether they need to play a
more important role in fraud prevention. • To discuss about data security in Indian
on May 31, 2005. The case discusses the
GOVERNANCE
BPO.
important manipulative deals of AIG with
its clients and its own subsidiaries, Pedagogical Objectives Industry IT/BPO
highlighting the aberrations from the US Reference No. GOV0025B
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• Discuss GAAP. Porsche acquired 20% stake in mass- committee of the company.
market carmaker Volkswagen, it created
Industry Trucking
apprehensions in the minds of shareholders • To discuss corporate governance issues
Reference No. GOV0024B
of both the companies. Porsche's investors like role of board, chief executive
Year of Pub. 2005
were apprehensive about the deal that ties officer's intervention, restructuring
Teaching Note Not Available
Porsche to a company, which has been plans and the future of Seibu.
Struc.Assig. Not Available
struggling financially. On the other hand, Industry Not Applicable
Keywords Volkswagen shareholders worried about the Reference No. GOV0021
delay in the company's restructuring Year of Pub. 2005
Corporate Governance, Board of Directors, process and future of the company. In Teaching Note Not Available
compensation plan, stock based, financial question was the role of Volkswagen's non- Struc.Assig. Not Available
disclosure, board committees, board executive chairman, Ferdinand Piëch, who
compensation, driver retention also happens to be the grandson of keywords
Ferdinand Porsche (founder of Porsche) Seibu Group Seibu Railway Company
and a major shareholder of Porsche. Kokudo; Japan’s major private railway;
Royal Charter Review: BBC's Japanese corporate governance practices;
Pedagogical Objectives
Radical Overhaul? Board’s role family owned business;
• To understand the clash of interests Restructuring plan revival options; Yoshiaki
Since its inception in 1927, the British involved in the Porsche - Volkswagen, Tsutsumi; Tokyo Stock Exchange (TSE);
Broadcasting Corporation (BBC) has been which has triggered a crisis in German Diversification expansion strategies;
a revered name in public service corporate governance. Scandals and controversies; Incompetent
broadcasting. The BBC's role was to 'educate, management and poor decisions; Reform
inform and entertain' its audience free from • To discuss the future of the Porsche - committee future of Seibu; Chief executive
political as well as commercial interference. Volkswagen deal. officers (CEO’s) intervention; Delisting and
The BBC was incorporated under a Royal bankruptcy; Japanese Security Exchange
Industry Not Applicable
Charter, which was renewed every ten years. Commission (JSEC).
Reference No. GOV0022
The BBC's eighth Charter would end on
Year of Pub. 2006
December 31 st 2006. In 2005, the
Teaching Note Not Available
government published the Green Paper as
Struc.Assig. Not Available Corporate America and
part of the BBC's Charter Review process.
In the Green Paper, it suggested sweeping
Sarbanes-Oxley Act:
keywords The Costs vs Benefits
changes to the way BBC was managed.
Porsche; Volkswagen; Ferdinand Piech; In response to the wave of scandals that
Pedagogical Objectives Clash of interests; Corporate governance; damaged the reputation of corporate
Shareholder value; Luxury sports carmaker; America, in 2002, the Securities Exchange
• To understand the Royal Charter Mass-market carmaker; Price-earnings
governing the function of BBC and Commission (SEC) formulated the
ratio; Restructuring; Volkswagen law Sarbanes-Oxley Act. The Sarbanes-Oxley
provides insight into the Green Paper
released by the British Government for Act intended to improve transparency,
reviewing the Royal Charter. management accountability and bring in
Corporate Governance accuracy in corporate disclosures and help
• To discuss whether the review would Problems at Seibu, Japan's restore investors' confidence. Analysts
bring about a radical overhaul in the way Major Private Railway: Board to believed that the benefits of the law would
the BBC functions.
be Blamed? be realised in the long run and would help
Industry Not Applicable
corporate America improve its tarnished
Reference No. GOV0023
Seibu Group is a giant Japanese image. However, companies had to bear
Year of Pub. 2006
conglomerate with assets estimated at 1.8 huge compliance-related costs of the act.
Teaching Note Not Available
trillion yen, with its principal business To bypass the act and avoid these huge
Struc.Assig. Not Available
operations in railways, tourism and real costs they began to de-list from the New
estate. The group's flagship company, the York Stock Exchange (NYSE) and other
keywords Seibu Railway Company is Japan's major US stock exchanges. The case details the
private railway company. Though Seibu has accounting irregularities and frauds that
British Broadcasting Corporation (BBC); grown into a major group, due to poor
Royal Charter; Charter review; Green have gradually come to light since 2001.
corporate governance, it was mired in losses
Paper; White Paper; Public service and scandals in 2004. As a result, many
broadcaster; Michael Grade; License fee Pedagogical Objectives
board members including the chairman
funding; Hutton enquiry; Ofcom; Radical Yoshiaki Tsutsumi quit the company. In • To understand the conflict of interest
overhaul addition, the Tokyo Stock Exchange de- between accounting and consulting
listed the company, which resulted in the professions, considered to be one of the
major decline of its share value. To revive reasons for such failures in corporate
Volkswagen's Ferdinand Piech's its fortunes, the company established a governance.
reform committee with outside members
Porsche Connections: The Clash • To discuss the ability of Sarbanes-Oxley
and decided to improve corporate
of Interests? governance practices.
Act in checking frauds and preventing
the top executives from siphoning off
German carmakers, Porsche and huge amounts at the cost of shareholders
Volkswagen, have enjoyed a long history Pedagogical Objectives and employees’ interest.
of close alliances and have collaborated on
• To understand the evolution of Seibu Industry Not Applicable
various projects. Volkswagen supplies about
over the decades, the scandals and the Reference No. GOV0020
30% of the automobile parts Porsche uses.
efforts of revival by the reform Year of Pub. 2005
But when the luxury sports carmaker,
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Teaching Note Not Available (CEO). The announcement triggered a responsibility to protect the interests
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Struc.Assig. Not Available strong opposition from a group of of minority shareholders.
shareholders, led by Ethos Foundation, a
keywords pension fund, which was against Nestle's Industry Not Applicable
Reference No. GOV0017
decision of concentrating the powers of
Sarbanes-Oxley act; Accounting scandals; Year of Pub. 2005
the chairman and CEO in the hands of one
Enron debacle; Corporate governance Teaching Note Not Available
person. It was opined that Nestle was going
problems; Image of corporate America; Struc.Assig. Not Available
against the best practices of corporate
Corporate disclosures; Compliance-related
costs; Delisting from stock exchanges;
governance as most of the European Keywords
companies and one-third of the Fortune
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Chief Executive Officer pay; Retaining Chicago; Newspaper; Ravelston; Hollinger
500 companies had adopted the practice
investor confidence; Benefits to International; Conrad Black; Barbara
of splitting the roles of chairman and CEO.
shareholders Amiel Black; Richard Perle; Tweedy
GOVERNANCE
Pedagogical Objective Browne; Richard Breeden; Securities
Exchange Commission; Corporate
The Oil-for-Food Scandal at UN: • To discuss the issue of the same individual governance; Minority shareholders
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Boardroom battles; Risk management; agencies. has extended stock options to the rank-
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Financial controls; Frank Cicutto; and-file employees since its public offering
Catherine Walter; John Stewart; Cultural • To discuss the reasons for the bankruptcy in 1986. During the IT boom, when
changes of Elite Model Management (NY) which Microsoft’s stock prices soared, stock
once had supermodels like Cindy options had created the so called ‘Microsoft
Crawford, Naomi Campbell and Linda millionaires’. Stock options helped create a
Evangelista on its list. culture of employee ownership and
CEO Compensation and
entrepreneurial spirit. But with the decline
Corporate Governance at NYSE Industry Not Applicable
in stock prices and growing anguish among
Reference No. GOV0010
Excessive CEO compensation has sparked Year of Pub. 2004 employees, Microsoft shifted to restricted
TE GO
off discussions in the academic and the Teaching Note Not Available stock. The pay package was also seen as
corporate circles. Dick Grasso, the former Struc.Assign. Not Available maintaining a balance between shareholders
Chairman and CEO of the New York Stock and employees’ interests.
GOVERNANCE
Keywords
Exchange (NYSE), was forced to step down
in September 2003 much before his Elite Model Management; Elite Model Pedagogical Objective
scheduled retirement in 2007, when he was
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compare and contrast different Adecco: Accounting Scandal or • To discuss the role of whistleblowers in
international codes on the concept. a Communication Problem? unearthing scandals and consequences
faced by whistleblowers.
Industry Not Applicable Adecco, a Forbes 500 Company and a
Reference No. GOV0007 global leader in human resource solutions, • To discuss the effectiveness of the
Year of Pub. 2004 is a merger of two of the largest personnel provisions for whistleblower protection
Teaching Note Not Available services companies in Europe, Adia and as envisaged in the Sarbanes-Oxley Act
Struc.Assign Not Available Ecco. On January 12th 2004, Adecco passed in 2002.
Keywords announced that it would delay its results • To discuss whether companies can
for the year 2003 citing the reason of prevent instances of bad corporate
Corporate governance in India; ‘material weaknesses in internal controls’, governance by encouraging employees
Liberalisation; Securities and Exchange in its North American branch. The stocks to voice their opinions.
Board of India (SEBI); Kumar Mangalam fell, followed by loss of customers and
Birla Committee; Malegam Committee; investors’ confidence. While investors filed Industry Not Applicable
Narayana Murthy Committee; Naresh lawsuits, investigations started. The early Reference No. GOV0004
Chandra Committee; Confederation of investigations revealed that nothing major Year of Pub. 2004
Indian Industry (CII) code; Tata Group of had really happened that was financially Teaching Note Available
companies; Tata Son’s Limited; Infosys significant. But, getting back the confidence Struc.Assign. Available
Technologies Limited; Birla Corporation; of customers who were switching to its
Organisation for Economic Co-operation Keywords
competitors and investors, was expected
and Development (OECD) principles; to become a costly affair. Whistleblowers; Sherron Watkins;
Cadbury Committee; King Committee Sarbanes-Oxley Act; Barron Stone; Russel
Pedagogical Objectives Hayes; Jeffrey Wigand; Michael Dell;
Charles Grassley; Patrick Leahy; Michael
• To discuss how the communication
Parmalat’s Collapse: The Banks’ policy of the company created
Kohn; Qui Tam; Fred Alford
Bad Debts confusion leading to a public relations
In December 2003, the world witnessed disaster.
The Parmalat Collapse
the swift downfall of the Italian dairy giant • To discuss how the situation could
Parmalat Finanziaria SpA, which for a long otherwise have been handled, in the wake Little did the European business community
time, was considered as the icon of Italy’s of Enron and Parmalat debacles. guess what was to come when Parmalat first
business community. The scandal that led hit newspapers for defaulting on a bond
to the stunning downfall of Parmalat was Industry Not Applicable buyback. In response to allegations and
called ‘one of the largest and most brazen Reference No. GOV0005 media reports, Parmalat’s Founder and
corporate frauds in history’ by the US Year of Pub. 2004 Chairman Calisto Tanzi, brushed aside the
market watchdog Securities and Exchange Teaching Note Not Available issue saying the money was safe in a high-
Commission. It was believed that Parmalat Struc.Assign. Not Available yielding Epicurum fund. But in reality, the
operated through a network of 200 issue came as the first among a string of
Keywords
subsidiaries, which the company used to financial scandals that eventually led to the
raise finances from the banks. Adia and Ecco; Adecco; Olsten temporary downfall of Parmalat. As one scandal led to
Investigations into the scandal brought staffing firm; Adecco annual results another, Parmalat’s reputation took a
many banks into the spotlight. delayed; Public relations policy; beating with it being dubbed as ‘Europe’s
Communication policy; Adecco brands; Enron’. While the US regulator, Securities
Pedagogical Objectives Felix Weber; John Browmer; Jerome Callie; and Exchange Commission, described the
Ernest & Young; Anderson; Enron and fraud as ‘one of the largest and most brazen
• To discuss the financial details of Parmalat; Revenue recognition; corporate financial frauds in history’,
Parmalat and the means through which Accounting irregularities journalists at BusinessWeek saw the case as
it raised funds from banks. ‘globalisation gone wrong’.
• To discuss the role of special purpose
vehicles set up by Parmalat to raise Whistleblowers – The New Pedagogical Objectives
money from banks to fund its expansion. Corporate Conscience • To discuss the factors that led to the
• To discuss the flaws/mistakes made by Keepers? rapid rise and fall of the dairy giant
banks in failing to realise the company’s Parmalat.
Among those instrumental in the exposure
wrong motives as well as troubles. of corporate scandals like Enron and • To discuss the required measures to
Industry Not Applicable Tyco, were whistleblowers like Sherron prevent such collapses.
Reference No. GOV0006 Watkins. Time magazine’s selection of
three women whistleblowers as ‘Persons Industry Not Applicable
Year of Pub. 2004
of the Year’ in 2002 brought into fore Reference No. GOV0003
Teaching Note Not Available
several lesser-known cases of Year of Pub. 2004
Struc.Assign. Not Available
whistleblowing. While the media made Teaching Note Not Available
Keywords heroes of these men and women, most of Struc.Assign. Not Available
Securities and Exchange Commission; them had to pay a heavy price for standing Keywords
Europe’s Enron; Bank of America; out of the pack. The case illustrates three
Citigroup; Calisto Tanzi; Bonlat; Deutsche cases of whistleblowing: Sherron Watkins
Bank; Merrill Lynch; UBS; Parmalat of Enron, Russel Hayes of CMC and
expansion; Enrico Bondi; Bankruptcy; Barron Stone of Duke Energy Corp.
Buconero
Pedagogical Objectives
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Parmalat; Grant Thornton; Europe’s economic crisis. Although Boeing’s defence
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Enron; Bonlat; Epicurum fund; Calisto business prospered, it was mushroomed by
Tanzi; Bank of America; Accounting a series of scandals. Ridden with allegations
scandal; Securities and Exchange of misconduct and indiscipline, Boeing’s
Commission; Parmalat expansion; Chairman and CEO, Phil Condit
Parmalat Brazil; Enrico Bondi; Parmalat’s relinquished his position in December
acquisitions; Bankruptcy 2003. Industry observers feared Boeing
might lose its biggest customer - the
Pentagon.
Coca-Cola-Contentious
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Overseas Business Practices Pedagogical Objectives
In its history of more than a century, Coca- • To discuss the circumstances that
GOVERNANCE
tarnished the image of Boeing.
Cola had expanded its operations worldwide
more than any other global enterprise. Its • To discuss the scandals that eventually
overseas operations, which had
Keywords
Coca-Cola; Pepsi; Coke; Sinaltrainal;
Channel stuffing; Italian Antitrust
Authority; Bottlers of Coke; Overseas
operations of Coke; Coca-Cola
Enterprises; Coke’s offices raided; Coke in
India; Coke in Columbia; Coke in
Uzbekistan; Soft drink industry; Business
practices
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For all progressive organisations of today, commercial success means much more than the profit margin. It is the image of the
company and the goodwill it generates in the market that determines its success in the true sense of the word. It is also
established that those companies, which portray a clean public image, can attract the brightest and the best talent. With
shareholder activism being the order of the day, the activities of the Board of Directors and the company practices are coming
in for a greater public scrutiny, and organisations that do not pass the muster, are found to decline rapidly.
The best way for organisations to guard themselves against such a possibility is by reading and discussing of case studies on the
ethical practices followed by both successful as well as unsuccessful organisations. This can enable one to chart out a plan for
ethical compliance for one's own organisation. The learning process also calls for unlearning and re-learning.
Case Studies on Ethics and Corporate Governance enables a better understanding of ethical and corporate governance issues
plaguing some of the best companies in the world. Along with dilemmas and their resolution, the governance initiatives are
also highlighted.
Sample Cases
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