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The concept of Corporate Governance (CG) is, now, more than a decade old in India.
However, the inadequacy and inefficacy of the governance framework in the country
has been espoused by the massive corporate disaster—Satyam. The fiasco has brought
into limelight the inherent shortcomings in the present corporate regulatory system
that has been benchmarked on the CG structure of the United States (US) and United
Kingdom (UK). In this backdrop, this article makes an effort to look at events that
precipitated the Satyam fiasco and the loopholes in the system that enabled the
fraud to occur. The present study also proposes to provide insights into the legislature
in formulating provisions for curbing such corporate mishaps that obliterate investor
confidence, particularly so when our country is desperate to draw on foreign capital
to propel its economic growth.
Introduction
The concept of Corporate Governance (CG) is more than a decade old in India. However, the
inadequacy and inefficacy of the governance framework in the country has been espoused by
the massive corporate disaster—Satyam. The fiasco has brought into limelight the inherent
shortcomings in the present corporate regulatory system. ‘Satyam’ that means ‘truth’ in Sanskrit
will always be remembered for, perhaps, the largest corporate scam to engulf this nation and
which may carry the label of ‘India’s Enron’ (The Economist, 2009). Possibly, the only silver lining
of this corporate catastrophe is to expose the hardcore truth of the extant CG scenario in India
to the millions of stakeholders.
Satyam Computers Services Limited (Satyam) was founded by B Ramalinga Raju in 1987, to
provide services in the Information Technology (IT) sector. It soon prospered to become the
country’s fourth largest software company with a customer base spread across 66 countries.
Stocks of Satyam were traded in the Bombay Stock Exchange (BSE), National Stock Exchange (NSE),
New York Stock Exchange (NYSE) and Euronext (Amsterdam, Europe). Satyam featured at the 185th
rank in the list of Fortune 500 companies at the time of the fiasco (The Economist, 2009).
* Professor, Department of Management Studies, Indian Institute of Technology Roorkee, Roorkee 247667,
Uttarakhand, India. E-mail: jatinfdm@iitr.ernet.in, jpsiitr@gmail.com
** Research Scholar, Department of Management Studies, Indian Institute of Technology Roorkee, Roorkee
247667, Uttarakhand, India. E-mail: navksddm@iitr.ernet.in, naveensrivastav@gmail.com
*** Research Scholar, Department of Management Studies, Indian Institute of Technology Roorkee, Roorkee
247667, Uttarakhand, India. E-mail: suzmaddm@iitr.ernet.in, shigufta.uzma@gmail.com
1
The Central Government Controlled Police Agency of India.
Conclusion
Provisions of the Companies Act, 1956, relating to accounts and audit have stood the test of
time and one hopes that Satyam was merely an aberration rather than the rule. Importantly,
auditors are also subject to regulations through the code of conduct formulated by ICAI.
The code provides for serious consequences including removal from membership and even
criminal prosecution in certain cases. One feels that these punishments should provide sufficient
deterrence. What needs to be ensured is that auditors and audit committees work in unison
2
Institute of Cost and Works Accountants of India.
3
Institute of Company Secretaries of India.
References
1. Afasaripour A (2009), “Corporate Governance Convergence: Lessons from the Indian
Experience”, Northwestern Journal of International Law and Business, Vol. 29, No. 2,
pp. 335-402.
2. Agarwal S (2008), “Satyam Top Honchos were Selling Shares from April”, The Financial
Express, available at http://www.financialexpress.com/news/Satyam-top-honchos-were-selling-
shares-from-April/400768
3. Ahmad T, Malawat T, Kochar Y and Roy A (2009), “Satyam Scam in the Contemporary
Corporate World: A Case Study in Indian Perspective”, available at http://papers.ssrn.com/
sol3/papers.cfm?abstract_id=1460022
4. Aneja R K (2009), “The Satyam Scandal Explained”, Harbus, February 17, available at
www.harbus.org/.../The-Satyam.Scandal.Explained-3633696.shtml
5. Chandrasekhar C P (2009), “The Satyam Scam: Separating Truth from Lies”, The Hindu,
January 14.
6. Companies Bill (2009), available at http://www.icsi.edu.in
7. Dey A (2009), “Post-Satyam, MCA Lays New Scrutiny Rules”, Business Standard,
December 16.
8. Garg A (2008), Hindu Business Line, December 22.
9. India Knowledge@Wharton (2009), “Scandal at Satyam: Truth, Lies and Corporate
Governance India Knowledge @ Wharton”, available at http://knowledge.wharton.upenn.
edu/india/article.cfm?articleid=4344
10. Kabra A (2009), “Improving Corporate Governance: A Blueprint for Preventing Future
Scams Like Satyam Computers”, Hardnews Special, January 27, Singapore.
11. Kakkad S (2008), “Buy Call: Satyam Computer Services; Maytas Deal Called Off ”, available
at http://www.topnews.in/buy-call-satyam-computer-services-maytas-deal-called-299230
Reference # 04J-2010-10-03-01