Case Study Of Satyam Scandal

Better Essays
Agency Problems(Satyam Scandal) Agency occurs when one party or company executive (agent) works with goodfaith and trust for the best interest of other party or shareholder (principal). Most of agency problems exist when there is legal relationship between principle and an agent creating the Principal-Agent Relationship. Commonly, principal-agent conflict may arise when agent is not practicing his duties as an agent. Such as; Duty to exercise care and skill this duty requires an agent to carry out his duties with care and skill especially duty of care and skill in his profession! Duty to account which means that an agent must provide full information about activities performed on behalf of the principal & account for…show more content…
Satyam in other name“truth” revealed the untrue side and destroyed all hopes of shareholder whom they invested they’re money in the company—by fraudelant misstatement, negligence, and complicit with companies independent auditors the PwC. Conflict of interest can be prevented if the company follow their duties as an agent of principle—doing what is opposite will result only in unknown consequences. Maintaining good corporate governance is really important, this shows the shareholders and other factors that the company represent 100% integrity in their financials {no irregularrities + no frauds = Satyam}.Stronger corporate governance can only be acquired if shareholders elects the right management, and carefully selecting management will only result in Outstanding Profits (Other threatning strategies from shareholders can be imposed to prevent agency problems). The aftermath of satyam incident was effective in terms of maintaining better corporate governance in future not just for satyam but the entire industry aswell. If one company ended up in becoming the new enron of the industry, this will ruin the entire reputation of the industry—which leads to low future investment within the country. Investors will only look up-to a healthy industry—unhealthy industry will not easily recover after being
Get Access