Satyam Brings Shame to Indian Corporate World
In an unprecedented move, Mr. Ramalinga Raju, promoter and Chairman of Satyam Computer Services, the fouth largest IT company in India has announced that he has been showing false and inflated data in the company balance sheet for years. He stated that from what was a minor gap in the company book when it was a company with only handful of employees, the magnitude of the problem grew with that of size of the company that currently employs around 53,000 and has operations in 66 countries worldwide. It boast of serving one third of Fortune 500 companies and also the US government.
Satyam has been under scrutiny since World Bank banned the company in October for allegedly installing spywares in some of their computers which Satyam denies. Then, in December Satyam management faced a revolt by investors for a proposed takeover of two companies engaged in construction for approximately $1.6 billion. It has later been found that Mr Raju has big stakes in those two companies.
Since then a tussle between the board and shareholders has been going on and shareholders have been demanding resignation of the Chairman and complete overhaul of the board. In the meantime it was found that promoters were just holding meager stake in Satyam as they have pledged most of their shares with lenders against loans. All these controversies led to huge loss of Satyam’s shares at the stock market. Already speculation was doing the round that Mr. Anil ambani - the Chairman of cash rich ADAG group might step in for a friendly takeover.
The problem got so big that Mr. Raju had no alternative but to reveal all his frauds and resign because he no longer has enough stake to control the company and if others seek to take over- they will find all the wrongdoings by him once they go through Satyam’s books.
Analyst say that Mr. Raju has not only damged future of Satyam but has created a bad impression on whole IT and outsourcing industry of India. Some commentators say that foreign clients might loose confidence in Indian companies as there is a big question mark on India’s corporate governance and transparency of their operations. Otherwise how could Satyam keep on with the fraud despite being auditored by world renowned accounting firm Pricewaterhouse Coopers?
Amidst all these, top leadership at Satyam has resolved that they would carry on and make Satyam a transparent corporation. But the maimum damage has already been inflicted not only for Satyam but questions are being raised on corporate ethics of whole Indian Corp. Shame on Satyam.