ETHICS &VALUES IN MANAGEMENT

CASE-WHAT WENT WRONG WITH THE SATYAM?

Group members(C-10)- Abhishek singh(12121) Ankur jain(12127) Ritesh jaiswal(12153) Sandeep v raju(12162) Pappu yadav(12166) Sarthak rohatgi(12182)

A BIOGRAPHICAL SKETCH OF RAMALINGA RAJU

Born on September 16,1954 in a family of farmers

He completed his B.com from Andhra loyala college at Vijayawada

He earned an MBA degree from Ohio university, USA

After returning to India in 1977 he started spinning and weaving mill named Sri Satyam

He shifted to real estate business named Satyam constructions

In 1987 Raju founded Satyam computer service with one of his brother in law DVS Raju

A BRIEF HISTORY OF SATYAM

• Established on 24th June 1987 • Was incorporated in 1991 as public limited company• Period of 1997-2003 was of very high growth• Mr. Raju was awarded with many honours

Downfall of Satyam :• In Dec. 2008 World Bank blacklisted Satyam on the charges of –

Providing Improper benefits to staff Data theft Bribing the staff

• On January 7, 2009 Mr. Raju confessed the wrongdoing in a letter issued to its board directors admitting fraud !

IMPORTANCE OF ETHICS IN BUSINESS

Ethics in business is influenced by the culture of the company

Taking right course of action may involve rejecting short term profits

Benefits of ethics in business – Attracting customers Attracting investors Reduced “Turnover rate” Helps in retaining talented employees Creates goodwill in the market

IMPACTS AND LESSONS LEARNT Impacts :

• Ripple effect• Impacts FDI

• Lessons learnt : Transparency should be very good Tighter norms for Chartered accountants A cap on revenues, at 10%, to an audit firm Independent directors should have sound technical skills Should have an effective “Whistle blower policy” Need for education on ethical values

THEORIES AND APPROACHES

1. Kohlberg Model• Post conventional Stages:

- Stage Five: Social Contract Orientation- Stage Six: Universal Moral Principles Orientation

Board of Directors- Stage One: Interpersonal Concordance Orientation

2. Theory of Universalism “Universalism suggests that in reaching a decision,

consider if the decision would be acceptable if everyone, in every situation, made the same decision.”

3. Peter Drucker model “Above all, do no harm”

4. Laura Nash model What are your intentions in making this decision? How does these intentions compare with likely results?

5. Utilitarian theory“moral actions are those that produce the greatest net pleasure compared with net pain.”

the Cost‐Benefit Analysis

RAMALINGA RAJU’s point of view

Individual driven unethical behavior: Lying Greed Bribery Embezzlement

System driven unethical behavior: As a whole

UNETHICAL BEHAVIOR Satyam’s point of view Increasing competition forced big corporations to do

something beyond their reach.

• Tata Consultancy Services (TCS)• Infosys Technologies• Wipro

Pressure to maintain this pace of growth Gap became a gulf

ETHICAL ISSUES INVOLVED

Not following corporate governance norms Tampering the financial data Misleading the shareholders fund Putting self-interest at the expense of shareholder’s interests

ETHICS IN BUSINESS

Ethical choices are difficult for businessman because : Bottom line is unforgiving in today’s competitive business world Pressure for results is much too higher

RECOMMENDATION FOR RESOLVING DILEMMAA three-step strategy that shows you how to combine them.

Step 1:Mr. Raju should have analysed the consequences of his wrong doings.

He should have thought the following questions-

• Who will be helped by what you do?

• Who will be hurt?

• What kind of benefits and harms are we talking about?

Step 2: Mr Raju should have analysed his actions How do they measure up against moral principles like honesty,

fairness, equality, respecting the dignity of others, respecting people's rights, and recognizing the vulnerability of individuals weaker or less fortunate than others?

• Do any of the actions that you're considering "cross the line," in terms of anything from simple decency to an important ethical principle?

• If there's a conflict between principles or between the rights of different people involved, is there a way to see one principle as more

important than the others? • What you're looking for is the option whose actions are least

problematic.

Step 3: Make a DecisionAfter careful analysis of both the steps given above, one should go for the one which, fits well into the situation.

RECOMMENDATIONS TO AVOID TRAGEDIES LIKE SATYAM IN THE FUTURE.

The Satyam fiasco, makes it imperative that corrective measures need to be taken at the earliest to stem the rot.

Government needs to set up a Board of Audit, is empowered to conduct surprise audit or on complaints of whistle-blowers.

The same auditor should not be allowed to continue for more than 3 years with a Company.

Cross-directorships must be banned. Incentives should be provided to Whistle-blowers. Laws should be made more stringent.

RECOMMENDATIONS TO AVOID TRAGEDIES LIKE SATYAM IN THE FUTURE.

The Department of Corporate Affairs should create a pool of independent directors with high integrity and prescribe for them adequate remuneration.

The conviction rate in corporate frauds, currently under a pathetic 5 per cent, must be improved.

The law and administration should come down heavily on breach of trust and fraud.

CONCLUSION Satyam scam is unparalleled in the corporate history of India,

and as some keen corporate observers point out, the world itself. The idea of a corporation, and the values and principles that

should guide its governance have hardly been imbibed by promoters.

An careless administration, ill-equipped regulatory system and terribly delayed justice delivery process only make things easier for the corporate crooks to make a killing.

Corporate governance framework needs to be implemented in letter as well as spirit. The increasing rates of white collar crimes demands stiff penalties and punishment.

Creating an awareness of the large consequences of small lies may help some to avoid this trap.

THANK YOU