Power Point Presentation - The Satyam Scandal
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Transcript of Power Point Presentation - The Satyam Scandal
History of corporate governance in India
Current problems in the Indian corporate sector
The Satyam Scandal
First phase: 1947 – late 1960s
Second phase (Socialist): early 1970s-mid 1980s
Third phase (Post – Liberalization): 1991 onwards
Poor economy
Sophisticated legal rules regarding listing and trading
Four operational stock exchanges
20 dominant family groups in the corporate sector
Dominant family groups under pressure: The Monopolies Commission
Competition from a new population of entrepreneurs
Financial institutions as shareholders
Opening of public sectors to private investment
1992: Securities and Exchange Board of India (SEBI)
1998: First Code of Corporate Governance: compliance was voluntary
2000: Birla Committee Report -> Clause 49 of the Listing Agreement was introduced
2003: the Murthy Committee -> Clause 49 became a law on January 1, 2006
Heavily concentrated ownership
Pyramidal structures
Tunneling of funds
Dominant v. minority shareholders
•Company Profile
•First Incidents
•Unveiling the Fraud
•Committing the Fraud: Main Actors
•Consequences
Founded in 1987 by B. Ramalinga Raju
Listed on the NYSE and the Bombay Stock Exchange
Operates in IT, business services, computer software
Major outsourcing corporation in India
Awarded repeatedly for excelling in corporate governance, transparency and innovation
•October 2008: Satyam blacklisted by the World Bank on accusations of data theft
•December 2008: the intercepted purchase of Maytas Properties and Maytas Infrastructure
January 7, 2009: Mr. Raju admitting to the Board of Directors persistent accounting irregularities.
“It was like riding a tiger, not knowing how to get off without being eaten.”
Mr. Raju and Insiders- Inflated assets by $ 1.47 billion- Underreported liabilities- Overstated quarterly income on a regular basis- Falsified bank accounts- Created fake salary accounts and misappropriated the money - Took loans from the company unlawfully
The Auditors: Price Waterhouse Coopers - 2000-till fraud discovery
Board of Directors
The Stock Exchange
Criminal and civil charges
The fate of the company post-crisis
Reforms in the corporate governance sector