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