Beruflich Dokumente
Kultur Dokumente
BySHAKUN (PGP/17/295)
Information Asymmetry
The reams of financial information that was possibly shared with the board few days before
the board meeting might have been too much to absorb as Satyam had grown to become a big
company. This could have been a possible point of failure. There were accounting
irregularities like inflated cash balances, understated liabilities and overstated receivables and
revenues but all of this went unnoticed as the channel of information was from the
management to the internal auditing agencies.
People
Satyams board of directors consisted of nine members. Five members of the Board were
independent as required by Indian listing standards. The board did not have a financial expert
on the board during 2008. Also, there were several prominent figures of the business world
on the board which could have led to a lack of scrutiny. The independent directors
succumbed to serve the interests of the family group instead of the interests of the
corporation.
II.
CULTURE
The board followed traditional culture. The structure, composition and information flow was
pre-determined. The culture was passive, lacked candor and there was little willingness to
challenge. In addition, there was a tendency to be deferential to age, seniority and authority.
AUDITING AGENCIES Internal Audit and PWC
Actions of Global Head Internal Audit: Created fake customer identities, generated fake
invoices, forged board resolutions, illegally obtained loans
PWC: Ignored the red flags and did not investigate non-interest bearing deposits, did not
verify independently with the banks, was paid exorbitant audit charges, was associated to
Satyam for nine years in a row
III.
IV.
STRUCTURE
Satyam had a top-down pyramid structure and had weak corporate governance historically, in
spite of being awarded the corporate governance award as well as getting listed on NYSE. It
had several business lines but treated them all as one entity. This led to tunnelling of
corporate gains i.e. transferring funds from one entity to another. Groups were permitted to
control more of the operations than their equity claims. It was difficult for the outside
shareholders to monitor performance. So in a way, the controlling group benefitted while the
minority shareholders were harmed.
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