(Mumbai University BFM Apr 2011) Corporate Governance has been very much in news with Rs. 7,000 Cr. Fraud Committed at Satyam an IT enterprise. Son of a grape farmer in Andhra Pradesh Ramalinga Raju decided to explore the World of Information technology by setting up Satyam Computers in 1987. The truth about Satyam has shaken the very roots of Indian Corporate philosophy. Moral fiber of detectors at Satyam was weak. When Raju was making dubious decisions, the detectors did not stand against it; they remained mute spectators, they did not protect the interest of cores of shareholders and also of 53,000 employees. There has been a complete failure of the Audit process and Collapse of Corporate Governance. The Fraud at Satyam was result of lack of transparency and absence of accountability. Raju admitted in a letter to Satyams board and SEBI that he had fudged figures in the enterprise’s balance sheet. He wrote what started as a manageable gap between operating profit and the one reflected in the books continued to grow. It has attained unmanageable proportions.
Questions:
(i) How Fraud was committed at Satyam? Has morality taken a back seat? (5)
(ii) What suggestions can you provide to prevent such Frauds in future? (5)
(iii) Explain the Role of Reputational Agents in the above case. (5)
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