Satyam fraud - lessons to be learnt

Satyam scam case has acted as an eye opener for more than a few people. The financial fraud at Satyam Computer Services was for more than Rs. 7000 crores which comes to approximately 1.4 billion dollars. This is one of the biggest frauds in recent times. Mr. Ramalinga Raju along with his colleagues were able to manage such a such scam without getting noticed shows the lack of corporate governance and the loop holes in current system.

The people who were affected most were the small time investors which had put their hard earned money in the stock of Satyam Computer Services. As a result of this scam, the Satyam share price right now is just above Rs 100. It had fallen drastically from all time high of Rs 550 to a lowly Rs 9. The stock price later recovered a bit when government of India acted promptly to save this company from going bankrupt. The client base of Satyam is huge since it caters to a lot list of companies across the globe. In addition to the clients, there was a huge danger to the livelihood of around 50,000 employees and their families working for Satyam.

The scam highlights the process of audit which was done by world famous Price Water House Coopers. Going forward, any auditor will think twice before giving clean chit to any company.

The scam has also highlighted how so-called independent directors on the board of the organization can be kept completely in the dark. As a company, Satyam boasted of eminent directors such as former Cabinet Secretary T.R. Prasad, Mangalam Srinivasan who advises the Kennedy School of Government of Harvard University and had served as scientific adviser to Indira Gandhi’s government, the former dean of the high-profile Indian School of Business M. Rammohan Rao, Vinod K. Dham, the “father of the Pentium microprocessor chip” and Krishna G. Palepu, professor at the Harvard Business School and a supposed expert on corporate governance. There are many people who are directors of as many as 15 different companies. How can someone hold so many positions and still be instrumental in one company’s growth?

After this huge scam, it is still to be seen whether Indian corporate sector takes stern action to reform itself or will it take another scandal of such enormity.