Essay About B. Ramalinga Raju And Members Of The Satyam Board

Satyam Computer Services Ltd
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Week 8 Ethics & Governance:Ownership structureCase study: SatyamSatyam Computer Services Ltd was founded by two brothers, B. Ramalinga Raju and B. Rama Raju, in Hyderabad, India, in 1987. It quickly grew to become the largest IT outsourcing company in the world, employing over 40,000 staff across a dozen countries. A public company listed on the Bombay Stock Exchange since 1991, Satyam also listed its securities on the New York Stock Exchange in 2001. By early 2008 Satyam (which means “truth” in Sanskrit) had become a US $7bn company, including names as well known as General Electric, Ford, Nestlé and Sony among its 600 or so international clients.In December, 2008, four members of the Satyam board resigned, however, after differences had arisen over the proposed acquisition of Maytas Properties and Maytas Infrastructure, two companies owned by Satyam chairman Ramalinga Raju’s sons. Satyam’s share price immediately dropped by 50%, halving Satyam’s market capitalisation, and the decision to acquire the Maytas companies was reversed. Yet as Ramalinga Raju informed Satyam employees: “The board arrived at its decision to bid for Maytas by following all required processes and procedures and while there was a spirited discussion among members, their vote to approve the motion was unanimous.”In January 2009, however, Ramalinga Raju himself resigned from the Satyam board, admitting to US $1bn in accounting irregularities. Ramalinga Raju explained that he had resigned due to pressures arising from the global financial crisis and that he and his brother Satyam CEO Rama Raju (who also resigned) had perpetrated the fraud in order to stop Satyam from becoming a takeover target. Indian police have since announced that the Rajus seem to have sequestered hundreds of millions of dollars from Satyam, hiding the stolen moneys in a web of up to 300 companies controlled by family members. Satyam’s share price has subsequently fallen to less than a tenth of its previous value and offers are currently being sought by a newly appointed Satyam board for buyers of the company.India’s Central Bureau of Investigation intend to file multiple charges against those accused of involvement in the fraud. Among those charged are the Raju brothers, two auditors and an adviser who are said to have conspired with Satyam executives to overstate the companys earnings. The charges will include counts of cheating, criminal conspiracy, forgery of accounts and destruction ofevidence. Last month, Satyam was rumoured to be in talks with IBM over a possible acquisition.Watch: The Consequences of Satyam – Wall Street Journal