Becg Module 5 Project Report_1460707312493

8/15/2019 Becg Module 5 Project Report_1460707312493

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A

Case StudyON

Satyam computer(Corporate governance issues at

stayam computer)

Prepared by

BADRAKI A ANKI! A"(#"B"A" $ S%#%S!%R&')

Academic ear & *+,& *+-

%nro..ment No & +'-/0*/0 **1

S2R%% 2"N"S23K4A CO44%5% O6 #ANA5%#%N!S!3DI%S7

RA8KO! (IN&5u9arat)

Submitted to 5u9arat !ec:no.ogica. 3niversity

3nder t:e 5uidance o;


2/17

SHREE H.N. SHUKLA COLLAGE OF MANAGEMENT STUDIES Page


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Abstract

The case examines the c !" !ate g #e!nance iss$es at the In%ia&ase% IT se!#ices c m"an'( Sat'am C m"$te! Se!#ices Limite% )Sat'am*.In mi%+Decem&e! ,-- ( Sat'am ann $nce% ac/$isiti n 0 t1 c m"anies +Ma'tas P! "e!ties an% Ma'tas In0!ast!$ct$!e 1ne% &' the 0ami2'mem&e!s 0 Sat'am3s 0 $n%e! an% Chai!man Rama2ingaRa4$ )Ra4$*. D$et a%#e!se !eacti n 0! m instit$ti na2 in#est !s an% the st c5 ma!5ets( the%ea2 1as 1ith%!a1n 1ithin 6, h $!s. 7$esti ns 1e!e !aise% n thec !" !ate g #e!nance "!actices 0 Sat'am 1ith ana2'sts an% in#est !s/$esti ning the c m"an'3s & a!% n the !eas ns 0 ! gi#ing c nsent 0 ! theac/$isiti n as it 1as a !e2ate% "a!t' t!ansacti n.

A0te! the %ea2 1as a& !te%( 0 $! 0 the "! minent in%e"en%ent%i!ect !s !esigne% 0! m the & a!% 0 the c m"an'. In ea!2' 8an$a!' ,--9(Ra4$ !e#ea2e% that the !e#en$e an% "! :t :g$!es 0 Sat'am ha% &eenin;ate% 0 ! "ast se#e!a2 'ea!s. The !e#e2ati n 0$!the! %ee"ene% c nce!nsa& $t " ! c !" !ate g #e!nance "!actices at the c m"an'. The case%esc!i&es the c !" !ate g #e!nance st!$ct$!e at Sat'am( its c %e 0 c n%$ct( ! 2es an% !es" nsi&i2ities 0 %i


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Issues

St$%' the c !" !ate g #e!nance st!$ct$!e that existe% at Sat'amC m"$te!s.

A""!eciate the im" !tance 0 C %e 0 C n%$ct an% =hist2e&2 1e!" 2ic' 0 a c m"an'.

Examine the ! 2es an% !es" nsi&i2ities 0 a c m"an'3s & a!% an%in%e"en%ent %i!ect !s.

C!itica22' ana2'>e the instances 1he!e the in%e"en%ent %i!ect !s0ai2e% t 0$2:22 thei! !es" nsi&i2ities.

Un%e!stan% the 2imitati ns 0 in%e"en%ent %i!ect !s in Sat'am3scase.



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CORPORA!% 5O>%RNANC%

C !" !ate G #e!nance is t'"ica22' "e!cei#e% as %ea2ing 1ith "! &2emsthat!es$2t 0! m the se"a!ati n 0 2ea%e!shi" ? c nt! 2.C !" !ate G #e!nance ma' &e %e:ne% as h 2%ing a &a2ance&et1eenec n mic ? s cia2 g a2s ? &et1een in%i#i%$a2 ? c mme!cia2g a2s.A g % c !" !ate g #e!nance is ne 1he!e a :!m c mmits ?a% "tsethica2 "!actices ac! ss its enti!e #a2$e chain ? in a22 0 its %ea2ing 1itha1i%e g! $" 0 sta5eh 2%e!s enc m"assing em"2 'ee( c$st me!( #en%e!s(!eg$2at !s ? sha!eh 2%e!s in & th g % an% &a% times

D%SID%RA!A O6 CORPORA!% 5O>%RNANC%

Right 0 Sha!eh 2%e!s@

The !ight 0 sha!eh 2%e!s a!e name2' as &e2 1@

The' sh $2% sec$!e 1ne!shi" 0 thei! sha!es.

The' ha#e # ting !ights.

The' ha#e !ight t 0$22 %isc2 s$!e 0 in0 !mati n.

The' can "a!tici"ate in %ecisi n n sa2e ! an' the! change inc !" !ate assets? ne1 sha!es

%?uitab.e treatment o; s:are:o.ders

A22 the sha!eh 2%e!s inc2$%ing min !it'an% 0 !eign sha!eh 2%e!s sh $2% gete/$a2 t!eatment.

Disc.osure @ !ransparency

The %isc2 s$!e an% %isseminati n 0 5e'in0 !mati n a& $t the c m"an' ta22 th se entit2e% 0 ! s$ch in0 !mati n.

Responsibi.ities o; t:e Board

The 0$ncti ns 0 the & a!% inc2$%e "! tecting the c m"an'( itssha!eh 2%e!s ? a22 its the! sta5eh 2%e!s.



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The0$ncti ns 1 $2% inc2$%e c nce!ns a& $t c !" !ate st!ateg'( !is5(exec$ti#e c m"ensati n? "e!0 !mance( acc $nting ? !e" !ting s'stem(m nit !ing e%RNANC%

Distinguis:ing t:e ro.es o; Board @ #anagement

The 0$ncti ns 0 the & a!% inc2$%e the &e2 1

Se2ect( %eci%e the !em$ne!ati n ? e#a2$ate n a !eg$2a! &asis( an%i0 necessa!'( change the CEO

O#e!see the c n%$ct 0 the c m"an' s &$siness

Re#ie1 ? 1he!e necessa!' a""! #e the c m"an' s:nancia2 &4ecti#es ? ma4 ! c !" !ate "2ans ? &4ecti#es.

P! #i%e a%#ice ? c $nse2 t t " management.

Se2ect ? !ec mmen% can%i%ate t sha!eh 2%e! s 0 ! e2ecting them t

& a!% 0 %i!ect !s

Re#ie1 an' the! 0$ncti ns t &e "e!0 !me% &' 2a1.

Separation o; t:e ro.es o; t:e C%O @ t:e C:airman

The ! 2es 0 theCEO an% the Chai!man a!e %i


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T!ans"a!enc'

8$sti:a&i2it' 0 the "a' in the c ntext 0 "e!0 !mance

The "! cess a% "te% in %ete!mining it

Se#e!ance "a'ments

N n+exec$ti#e %i!ect !s "ensi ns

P! tecti n 0 Sha!eh 2%e!s !ights ? thei! exec$ti#es@

6* The!e a!e a n$m&e! 0 /$esti ns !e2ating t this iss$e as

,* Sh $2% c m"anies a%he!e t 6 sha!e 6 # te "!inci"2e a21a's

* Sh $2% c m"anies !etain # ting &' a sh 1 0 han%s ! &' " 22

* Can sha!eh 2%e!s !es 2$ti n &e &$n%2e%

* Sh $2% sha!eh 2%e!s a""! #a2 &e !e/$i!e% 0 ! a22 ma4 ! t!ansacti ns



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#A8OR !2R3S! AR%AS O6 CORPORA!%5O>%RNANC%

The six ma4 ! th!$st a!eas 0 c !" !ate g #e!nance a!e as &e22 1s@

6* The' ca22 $" n g #e!nment t "$t in "2ace an e


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R%4%>ANC% !O !2% PR%S%N! SC%NARIO

Sat'am scam 1as n t an eas' iss$e. It has its 1n c m"2exities as itin# 2#e%6 --- c! !e scam. Sat'am scam ha% &een the exam"2e 0 !

0 22 1ing " ! g #e!nanceP!actices. It ha% 0ai2e% t sh 1 g % !e2ati n1ith the sha!eh 2%e!s an% em"2 'ees.S as t th! 1 a 2ight n the " !g #e!nance "!actice at ne 0 the ma4 ! ITgiants( the nee% t st$%' s$chcase is ma%e im" !tant. Ta5ing this scam as a ! 2em %e2( it c $2% &es$ggeste% that the!e is a nee% t 0!ame $" g % g #e!nance !$2esan% seet the "! "e! im"2ementati n 0 it.



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IN!ROD3C!ION !O SA! A#CO#P3!%R CONS34!ANC 4I#I!%D

SAT AM COMPUTER CONSULTANC LIMITED 1as esta&2ishe% n 8$ne ,69 . The 0 $n%e! 0 s$ch !gani>ati n 1as M!.Rama2ingaRa4$.Chie0 exec$ti#e Jce! at the time 0 the scam 1as M!.RamM'nam"atiAn% chie0 :nancia2 Jce! 0 s$ch 1as M! a2%amaniS!ini#as.N n exec$ti#e%i!ect !s1e!e K!ishna Pa2e"$? in %.K.Dham. sat'am c m"$te! c ns$2tanc'2imite%has its hea%/$a!te! at H'%e!a&a%.

Sat'am c m"$te! se!#ices 2imite% has its se#e!a2 s$&si%ia!ies@

Sat'am BPO

Citis 0t

CA Sat'am

STI

B!i%ge C ns$2tanc'

The #a!i $s se!#ices


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# 2$nta!i2'.E#en the a$%iting c m"an'( name% KPMG 1as "ena2i>e%. Se#e!a2&i%%ingt 5 "2ace 0 ! ac/$i!ing sat'am &' se#e!a2 c m"anies. The :na2 th!ee&i%%e!s0 !sat'am 1e!e L?T( S"ice g! $" an% tech mahin%!a.

A0te! the s$ccess0$2 &i%%ing( Tech mahin%!a ac/$i!e% sat'am an% thene1 chie0exec$ti#e Jce! is M!. C.P. G$!nani.

The t1 in%e"en%ent%i!ect !s a!e C.Ach$than an% T.N.Man ha!an. 1 !5ing%i!ect !s inc2$%e%M!. C.P.G$!nani an% MR. ineetNa''a!.



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D%!AI4S O6 !2% CAS% S!3D $ SA! A# SCA#

the case examines the c !" !ate g #e!nance iss$es at the In%ia&ase% ITse!#ices c m"an'( Sat'am C m"$te! Se!#ices Limite% )Sat'am*.

In mi%+Decem&e! ,-- ( Sat'am ann $nce% ac/$isiti n 0 t1 c m"anies +Ma'tas P! "e!ties an%Ma'tas In0!ast!$ct$!e 1ne% &' the 0ami2' mem&e!s0 Sat'am3s 0 $n%e! an%Chai!man Rama2ingaRa4$ )Ra4$*. It "2anne% tac/$i!e 6-- an% - sta5es inMa'tas "! "e!t' an% in0!a 0 ! 6. B. D$et a%#e!se !eacti n 0! m instit$ti na2in#est !s an% the st c5 ma!5ets( the%ea2 1as 1ith%!a1n 1ithin 6, h $!s. 7$esti ns1e!e !aise% n thec !" !ate g #e!nance "!actices 0 Sat'am 1ith ana2'stsan%in#est !s/$esti ning the c m"an'3s & a!% n the !eas ns 0 ! gi#ing c nsent 0 !theac/$isiti n as it 1as a !e2ate% "a!t' t!ansacti n.

A0te! the %ea2 1as a& !te%( 0 $! 0 the "! minent in%e"en%ent%i!ect !s!esigne% 0! m the & a!% 0 the c m"an'. In ea!2' 8an$a!' ,--9(Ra4$!e#ea2e% that the !e#en$e an% "! :t :g$!es 0 Sat'am ha% &eenin;ate% 0 ! "ast se#e!a2 'ea!s. The 0 22 1ing 1e!e the in;ate% :g$!es@

In;ate% cash an% &an5 &a2ance Rs. - -c!

N nexistent acc!$e% inte!est Rs c!

Un%e!state% 2ia&i2it' 0 Rs.6, -c!

O#e!state% De&t ! " siti n 0 Rs. 9-c!

In;ate% sta< &' 6,--- ) Act$a2 1e!e ----*

Re#en$e 0 Rs., --c! )Act$a2 1e!e Rs.,66,c!*

O"e!ating ma!gin t &e 9 c! ) Act$a2 1e!e 6c!*

INDIA S LARGEST FRAUD+ Rs. --c! !e )n 1 estimate% as 6 ---c! !e*

As "e! the %e:niti n 0 c !" !ate g #e!nance %isc$sse% a& #e(A g %c !" !ate g #e!nance is ne 1he!e a :!m c mmits ?a% "tsethica2"!actices ac! ss its enti!e #a2$e chain ? in a22 0 its %ea2ing 1itha 1i%eg! $" 0 sta5eh 2%e!s enc m"assing em"2 'ee( c$st me!(#en% !s(!eg$2at !s ? sha!eh 2%e!s in & th g % an% &a% times.C !" !ateg #e!nance inc2$%es #a!i $s "a!ties@



13/17

6* Sha!eh 2%e!s,* Em"2 'ees

* Management* Ban5e!s* G #e!nment

G #e!nance iss$e at Sat'am a! se &eca$se 0 n n0$2:22ment 0 &2igati n0 the c m"an' t 1a!%s the #a!i $s sta5eh 2%e!s. It "! #e% a " !

!e2ati nshi" 1ith a22 the sta5eh 2%e!s.

It is 1e22 5n 1n that a sha!eh 2%e! has a !ight t get in0 !mati n 0! mthe !gani>ati n( s$ch in0 !mati n c $2% &e 1ith !es"ect t the me!ge! an%ac/$isiti n. Sha!eh 2%e!s ex"ect t!ans"a!ent %ea2ing in an!gani>ati n.The' e#en ha#e !ight t get the :nancia2 !e" !ting an%!ec !%s.

In the case 0 sat'am( the a& #e &2igati ns 1e!e ne#e! 0$2:22e%. Theac/$i$isiti n 0 ma'tas in0!ast!$ct$!e an% "! "e!ties 1e!eann $nce%(1ith $t the c nsent 0 sha!eh 2%e!s. The' 1e!e e#en "! #i%e%1ith 0a2sein;ate% :nancia2 !e" !ts. The sha!eh 2%e!s 1e!e cheate%.

It is 1e22 5n 1n that the c 22a"se 0 an' !gani>ati n s !e"$tati n hasa%iect im"act n the em"2 'ee s 4 &. As "e! the case( em"2 'ees1e!esh 1n 1ith a in;ate% :g$!e. The excess 0 em"2 'ees in the!gani>ati n1e!e 5e"t $n%e! IRTUAL POOL 1h !ecei#e% 4$st - 0 thei!sa2a!ies an% se#e!a2 1e!e !em #e%.

The enti!e scam ha% its im"act n management. 7$esti ns 1e!e!aise% #e! the c!e%i&i2it' 0 management.

An' !gani>ati n has its &2igati n t 1a!%s the G #e!nment &' means 0 time2' "a'ment 0 taxes an% a&i%ing &' the !$2es an% 2a1s 0!ame% $"&'the G #e!nment. As "e! the case 1ith sat'am( the c m"an' %i% n t"a'a%#ance tax 0 ! the :nancia2 'ea! ,--9. As "e! the !$2e( the a%#ancetaxis t &e "ai% times a 'ea! s$ch 1as n t 0$2:22e% &' them.

Fina22' the sat'am c m"$te! c ns$2tanc' 2imite% %i%n t ha#eg %!e2ati nshi"i1t&a5 t . SCS 1as &2ac52iste% &' 1 !2% Ban5 #e!

cha!ges 0 B!i&e!'.It 1as %ec2a!e% ine2igi&2e 0 ! c nt!acts t "! #i%ing@6* Im"! "e! &ene:t t &an5sta


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15/17

T sh 1 s$"e!i ! !"e!0 !mance

Raising :ctiti $s &i22s 0 ! se!#ices that 1e!e ne#e! !en%e!e%.

T inc!ease the Cash ? &an5 &a2ance c !!es" n%ing2'.

O"e!ating "! :ts 1e!e a!ti:cia22' & ste% 0! m the act$a2 Rs 6c! !et Rs 9 c! !e.Its :nancia2 statements 0 ! 'ea!s 1e!e t ta22'0a2se( c 5e% $" an%...

Ne#e! ha% Rs - c! !es )US 6.- Bi22i n* sh 1n as cash 0 !se#e!a2 'ea!s.

Its 2ia&i2it' 1as $n%e!state% &' 6., Bi22i n.

The De&t !s 1e!e #e!state% &' -- mi22i n "2$s.

The inte!est acc!$e% an% !ecei#a&2e &' Mi22i n ne#e! existe%.S1hen the case came in 2ight 0 22 1ing a!e the acti ns that has&eenta5en@Nassc$m sets $" "ane2 t a# i% sat'am 2i5e case in 0$t$!e+ 0 !me%ac !" !ate G #e!nance ? ethics c mmittee( chai!e% &'

N.R.Na!a'anaM$!th' )chai!man an% chie0 ment ! 0 In0 s's.*

Hin%$4a G2 &a2 cha25s $t 6-- %a' "2an 0 ! sat'am.

ea! &an n sat'am t &e !e#ie1e%.

G #t. !%e!s CBI t "! &e 0!a$% ) c nce!ne% a& $t ,---em"2 'ees*

Agencies ) m nth time t "! &e*+

6* Se!i $s 0!a$% in#estigati n Jce)SFIO*

,* Ma!5et !eg$2ati n SEBI(

* Instit$te 0 cha!te!e% acc $ntanc' In%ia )ICAI*

* An%h!a " 2ice



16/17

The Se&i ha% in Decem&e! gi#en a c2ean chit t Sat'am in the "! &en#i 2ati n 0 c !" !ate g #e!nance 2a1. The g #e!nment has !ea2i>e% thenee% 0 c %e 0 c n%$ct ? 1hist2e &2 1e! " 2ic'( n 1 1e 1i22 %isc$ss 1hatis these te!ms an% h 1 the' "2a'e% anim" !tant ! 2e.

COD% O6 COND3C! This C %e 0 B$siness C n%$ct c #e!s a 1i%e !ange 0 &$siness "!acticesan%"! ce%$!es. It % es n t c #e! e#e!' iss$e that ma' a!ise( &$t it sets$t &asic"!inci"2es t g$i%e a22 em"2 'ees an% Jce!s 0 the C m"an'.

Th se 1h #i 2atethe stan%a!%s in this C %e 1i22 &e s$&4ect t %isci"2ina!'acti n(

Inc2$%ing " ssi&2e%ismissa2 F$!the!m !e( #i 2ati ns 0 this C %e ma' a2s&e #i 2ati ns 0 the 2a1an% ma' !es$2t in ci#i2 ! c!imina2 "ena2ties 0 ! ' $(' $! s$"e!#is !s an%Q ! theC m"an'. The &asic "!inci"2es %isc$sse% inthis C %e a!e s$&4ect t an'C m"an' " 2icies c #e!ing the same iss$es@

C m"2iance 1ith 2a1s( !$2es( an% !eg$2ati nsC n;icts 0 inte!estC !" !ate "" !t$nitiesC m"etiti n an% 0ai! %ea2ingP 2itica2 c nti&$ti nsDisc!iminati n an% ha!assmentHea2th an% sa0et'C n:%entia2it'P! tecti n an% " 1e! $se 0 c m"an' asset



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BIB4IO5RAP2


Becg Module 5 Project Report_1460707312493

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