Case Study: Satyam Scandal

In this incident, the chairman of one of India’s largest technology company, Ramalingam Raju, the person who has sought to use technology to improve life in rural India said that he concocted important financial results, including a cash balance of more than 1 billion dollars. Analysts in India have termed the Satyam scandal India's own Enron scandal. Some social commentators see it more as a part of a broader problem relating to India's caste-based, family-owned corporate environment. This Scandal is obviously a major blow to the reputation of the IT outsourcing industry in India, and reveals some of the challenges of due diligence in such relationships.

Amusingly, Satyam means “truth” in the archaic Indian language “Sanskrit”. Satyam won the ‘Global Peacock Award’ with for global excellence in corporate accountability by the World Council for Corporate Governance on September 2008. Unfortunately, no longer than five months, Satyam became a great accounting fraud after the World Council for Corporate Governance awarded Satyam the Global Peacock Award.

The first section of this essay focuses on the possible causes of corporate failures including dominant CEO, poor strategy decision and the failure of internal control. Secondly, it discusses how the third edition of corporate governance principles and recommendations could be applied to prevent the causes of the failure. The 1st, 2nd, and 7th principles along with specific recommendations will be mentioned in this section. However, the context is concerned solely with the causes stemming from Dick Smith itself.

Corporate governance is the set of processes, customs, policies, laws and institutions, which directed, administered and controlled over the corporation (Monks & Minow, 2008). Corporate governance is a way by which a company governs itself for providing the values to their stake holders. The WorldCom did not follow the corporate governance policy. If the WorldCom would have followed the corporate governance it would have not led towards this business failure and company would have not gone for the unethical practices conduct in the organization. Corporate governance would have increased the faith of stakeholders towards the company and company would have survived for long time (Monks & Minow, 2008).

Their employees are united by the strong values of accountability, respect, teamwork and integrity. They make sure that extraordinary ethical standards, and a steady commitment to safety, invade company’s organization. Some of corporate governance has found lacking as following its area;

Describe the governance structure at Satyam. What was the “tone-at-the-top” at Satyam during the fraud

But according to the history of Scrushy, him belonging from a poor background and struggling his way to work up the pharmaceutical company and being approached to startup his business with 1 million, the expectations to meet the investors requirements served as a high stress factor on the CEO himself and according to Weld et.al, (2004, p.44), the fraud took place in a period where the economic growth of a company lacked regulations, which made it easier to get away with things. In reference to Weil (2004, p.45), the leaders in the 1990s were more focused on revenue than profitability. Growth was considered the key for a company. In order to fulfill the whole dilemma, such conditions pressured Scrushy to continue to increase the company’s growth by meeting the expectations of the

This case overall probes into 3 basic financial statements of the company and management’s view as well as auditors comments on it. It teaches about how business ethics and corporate governance works.

A once massive communications company was brought to ruin by the mishandling of DIRECTORS, OFFICERS, and the CEO. Between 1999 and 2002 the CEO Bernie Ebbers orchestrated over $9 billion worth of fraudulent accounting transactions. Surely all of this was not accomplished by just one man, this took teams of people who were unwilling to question authority or stand up during times of corporate wrong doing. Therefore, the information to follow will contain explanation of how this fraud was committed and by whom, the reasoning behind the fraud, the consequences of their actions for them and the corporation, and the final outcome for the corporation and those directors and officers held accountable.

In fact, neither Rich nor Keeling paid attention to this control and coordination process. This negligence has led to poor corporate governance structure, causing problems failed to be detected by the board of directors. And instead, made the problems became worse. Pass (2004) explained corporate governance is concerned with the duties and responsibilities of a company’s board of directors in managing the company and their relationship with the shareholders of the company and other stakeholder group. While corporate governance plays a crucial role for company sustainability, Rich and Keeling were not involving the shareholders directly to the operation of the company in a timely basis. Needless to talk about the involvement of the shareholders, even Rich and Keeling as the founder were not irresponsible enough to manage planning for new product, forecasting staffing needs and training, advertising, and the availability of products. All those important processes were ignored and caused the frustration of the customers. This was directly impact to the call center staffs who were pressurized by the complaints and anger of customers. As a result, the turnover in call center increased to over 100% per year.

In 2015, The Japanese company owned Toshiba Corporation’s scandal lead to the CEO, Hisao Tanaka’s resignation after an independent financial audit revealed accounting discrepancies totaling 58.9 million dollars. Well known for various home electronics (TV, VCRs, etc.) and household appliances (dishwasher, washing machines, etc.) the Toshiba Corporation has been operating since 1875. An analysis of what happened to Toshiba demonstrate a lack of ethical standards in leadership, transparency, and finance.

Satyam Scandal in effect was a massive accounting scandal. Various accounting and financial statements had been manipulated and forged by intentional omissions, inadequate disclosures and by intentional misapplication of the accounting policies. Assets of the company had been overstated than the actual ones, fictitious deposits had been shown in the bank accounts with interests on it. It was not only an example of bad governance but also of dishonest governance intending to siphon off public funds from the Company by manipulating the data and accounts in connivance with the external auditors. Ramalinga Raju,

The Satyam scandal is a corporate scandal that worked in India in 2009 where Chairman Ramalinga Raju confessed that the company's accounts had been falsified not in small numbers but largely. The Global corporate community was shocked and scandalized when the chairman of Satyam, Ramalinga Raju resigned on 7 January 2009 and confessed that he had manipulated the accounts by US$1.47-Billion. In February 2009, CBI took over the investigation and filed three charge sheets (on 7 April 2009, 24 November 2009 and 7 January 2010), which were later clubbed into one. On 10 April 2015, Ramalinga Raju was convicted with 10 other members.

This is best expressed by sharing Satyam’s history, credibility, financial health, media/investor crisis, fraud discovery and aftermath.

This paper will discuss the corporation WorldCom, a telecommunications company that was based in Mississippi. In 2002 WorldCom was involved in one of the largest accounting scandals in the United States. WorldCom inflated its assets by nearly $11 billion dollars, which eventually lead to about 30,000 employees losing their jobs, as well as, 180-billion dollars in losses for its investors. The CEO at the time of this accounting fraud was Bernard Ebbers and led to him receiving a 25-year prison sentence. This paper will go into the details of how WorldCom was able to manipulate its accounting records to deceive its internal auditors, as well as, investors.