SUBJECT: BUSINESS ETHICS

Internal 1
JLUID: JLU05162
ROLL NO: 2020MBA020
Course Code: MBAC20301

SUBMITTED BY: SUBMITTED TO:

ABHISHEK BIDHAN DR. ANUJA AKHOURI
Que1: Is only Mr. B Ramalinga Raju responsible for Satyam’s fiasco?
Ans: Mr. B Ramalinga Raju admitted to his crime on January 7, 2009, and cleared
all top Satyam personnel, claiming that they had no idea what he was doing to
orchestrate the Rs. 7800 crores fraud on Satyam's financial statement. However,
the company's proprietors, together with Mr. B Ramalinga Raju, were also
involved in Insider Trading of the company's shares in order to collect funding for
the development of a large land bank. Mr. B Ramalinga Raju started the
deception, but as time went on, more people were associated with him. Mr. B
Ramalinga Raju raised the funds to buy the land on behalf of 330 corporations
and approximately 30 individuals. They were all shareholders in these companies,
327 of which were affiliated to the family.
Que2: What are the major ethical issues relating to finance involved in this
case?
Ans: Ramalinga Raju, the chairman of Satyam, is a textbook illustration of
unethical business activities in the sector in this case. He was driven solely by a
desire for money and territory. He aimed to compete with the top three IT
corporations in India (Infosys, TCS and WIPRO). Raju chose the simplest, yet most
immoral, tactics to accomplish his goals. He faked accounting records, dodged
taxes, and stole money from shareholders for nine years by establishing fictitious
clients, account salaries, and invoices. Ramalinga Raju established his company's
strong financial health and raised funds from shareholders to buy land. He'd
earned the Golden Peacock Global Award for Good Corporate Governance,
ironically. Furthermore, in December 2008, the World Bank barred Satyam from
doing business for eight years for providing "improper benefits" to Bank staff. As a
result, the company's ethical standards were inadequate. According to SFIO's
findings, Satyam's financial sheet as of September 7, 2008 had an accrued interest
of Rs. 376 crores, which was non-existent. The company had created the
impression that its fixed deposits were approximately Rs 3318.37 crore, whereas
in fact it only had approximately Rs 9.96 crores in FDRs. Exaggeration of personnel
numbers was one of the most prominent sources of fraud at Satyam. While Raju,
the company's founder and chairman, declared that it had 53,000 employees, the
actual count was little more than 40,000. The fictitious figure was only
conceivable when payments to the remaining 10,000 employees were falsified
year after year - an operation that plainly required the construction of sham firms
with a large number of employees.

Que3: Who & how could have stopped this fiasco?

Ans: In this scenario, Satyam Computer Service's audit and accounting divisions
have the ability to put a stop to this disaster. Satyam's audit and accounting
departments were conducted in a misleading and opaque manner in order to
artificially increase the company's share price. Both departments are aware that
this has resulted in the collapse of investors. A week before B Ramalinga Raju's
bombshell confession, PwC, Satyam's auditors from 2000 to 2008, acknowledged
that its audit report was erroneous because it was based on incorrect financial
statements presented by Satyam management. If the audit and accounting
departments did not artificially raise the -company's share price at the time.