Governance Failure at Satyam Case Solution & Answer

Governance Failure at Satyam Case Solution


This case is based on the situation analysis of SATYAM’s failure, for which its corporate analysis is done through the company’s internal analysis.

1.1 Independent Directors

The most important role of the independent director is to guide the company and support it in making its key decisions. The company has to be very vigilant regarding its corporate governance and standard. However, in the case of SATYAM, the independent directors are not active for the company’s operations and they were completely dependent on the other company PwC, which created misinformation, leading to the delivery of inaccurate figures.

1.2 Overconfidence

SATYAM was very overconfident regarding its growth and share prices in the company. The company had pride about its employees and profit. It was not willing to accept the worst situation it was in, which further created difference between the actual profit and the profit which was written in the accounting book.

1.3 Audit

The most important factor was the non-verification of the company’s assets and its cash flow. Although, the audit was done but it claims the company’s profit. The internal audit was not done clearly, and the entire committee was responsible for it, because they did not let the clear audit of the company happen, externally and internally.

1.4 Weak Corporate Governance

Weak corporate governance is also the major issue which contributed significantly to the company’s failure, because appropriate strategies were formulated but they were not implemented in the company’s operations with clarity. Moreover, there is a lobby of employees from the top management to the lower management, which created negligence towards corporate governance policies.

1.5 Pressure to Meet Expectation

SATYAM had a tough competition in the share market, because the stake holders had a high expectation with the company, whichput the company in pressure as the company had failed to emphasize on its internal operations.

2.Impact on the Stakeholders

However, SATYAM had a very influential impact on its stakeholders after the financial crises.

2.1 Shareholders

The shareholders in the SATYAM case suffered extremely, because they were not given the right information and were deceived. The consequences which occurred after this matter, lasted ahuge impact on the share market as well as the company’s shareholders who lost their money.

2.2 Employees

The impact of SATYAM fraudulent case impacted the employees on higher level because the white collar employees were also included in the case. Many of them lost their jobs and they cannot be further employed at any other firm because of the company’s fraudulent case.

2.3 Clients

The clients also lost their trust over SATYAM alongside losing their invested money Moreover, the clients moved towards the competitor companies.

2.4 IT Sector

The IT sector in India also suffered to a significant level, because it lost many clients from all over the world, who had outsourcedto the IT companies of India for their operations. The image of the country also got negatively affected.

2.5 Indian Economy

Indian economy had a significant impact, because the GDP also fell because of the most lucrative firms being involved in the fraud case, due to which international clients also lost their trust over Indian companies………………….

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