The Fall of Satyam
Sep 15th, 2010 by palimarrao
Business ethics which are a formidable part of corporate responsibility are needed for more than just company’s promotion….they are essential for the company’s survival.
On January 7 2009, Satyam Computer Systems, once a formidable name in the IT scene in India, had finally fallen, after years of the company’s chairman Ramalinga Raju and Managing Director, Rama Raju “cooking the books”.
The company’s balance sheet was full of ridiculous figures and non-existent cash. For example, the company’s balance sheet of 30 September 2008 mentioned an accrued interest of USD 81.59 million which was non-existent.
The news of this scam broke out when investors forced the company to call off a $1.6-billion acquisition of two construction firms, both partly owned by Raju and his family. Auditors found that in the July-September quarter, operating profit had been overstated by 11 times the actual result.
Satyam’s reputation was tarnished and its shares plummeted nearly 78% to 40 INR (1 CAD) in Sensex.
The company’s fraudulent ways of operation did lead to its decline as mentioned in the video- Stakeholder Theory by Professor Freeman. Had Satyam followed the Stakeholder theory and equally promoted the interest of all the “stakeholders”, this debacle wouldn’t have taken place.
Reference:
Associated. “CBC News – Money – Satyam Computers Chairman Admits Books Cooked for Years.” CBC.ca – Canadian News Sports Entertainment Kids Docs Radio TV. 7 Jan. 2009. Web. 16 Sept. 2010.
URL:
http://www.cbc.ca/money/story/2009/01/07/satyam.html