In this article , you will get to know that How Satyam Scandal becomes a reform of Corporate Governance
Table of Contents
Satyam Scandal Overview
l The Satyam Computer Services scandal was India’s largest corporate fraud until 2010. The founder and directors of India-based outsourcing company Satyam Computer Services, falsified the accounts, inflated the share price, and stole large sums from the company. Much of this was invested in property. The swindle was discovered in late 2008 when the Hyderabad property market collapsed, leaving a trail back to Satyam.[1] The scandal was brought to light in 2009 when chairman By r Raju Ramalinga Raju confessed that the company’s accounts had been falsified.
Causes of Satyam Scandal
It occurs because Raju was doing false statement in Satyam Computer Services . Another cause of this scandal that Insider Trading was done by its Directors. He was showing fake sales and fake profits . By which, he was buying property because he was thinking that he will got profit from real estate agency but recession occurs in 2009 and his all property felt down . His another plan was that he will tell to the public that there invested money is in Matyas properties. but his this plan also fails .
How Satyam Scandal found out
Raju ultimately admitted to his deceptions after being cornered and given no other choice. On January 7, 2009, he acknowledged inflating Satyam’s assets by a stunning Rs. 7,800 crores, accounting for approximately 94% of the company’s assets, in a letter to Satyam’s Board of Directors and authorities. Furthermore, he admitted to overstating Satyam’s revenues by Rs. 5,040 crores, accounting for nearly 75% of the company’s revenue. Raju said he worked independently and that neither his auditors nor board members knew of his illegal operations
How Satyam Scandal could be prevented
It can be prevented if accountants doesn’t completing their statutory obligations since they used Satyam’s tools to audit instead of their own independent testing mechanism. Bord of committee would have power and were independent to take steps and audit committee has also worked independently.
What steps were taken by corporate government after Satyam Scandal
Sebi Reforms
After this scandal Sebi also reforms and had told for tighten the rule and regulation. All the listed companies will disclose all the information about company.
whistleblower policy
Government also takes action regarding the whistle blower policy . and general public will introduced and get notify about all the information and changes if occurs in any companies.
independent directors
the scandal highlighted the role of independent directors in ensuring checks and balances. act were different before scandal but after the scandal act mandates at least one third of the board to comprise independent directors for public companies.
Auditing reforms
after Satyam scandal occurs it is mandatory for all listed companies that they will change the auditing firm and auditors in 5 or 10 years so that accounts should be audited very carefully .
NFRA
Government introduced to NFRA means National Financing Reporting Authority which reports and watch all the financial transactions occurs in a company.
Enhanced Disclosure Requirements
The Act increased the disclosure requirements for companies. Directors are now required to disclose their interest in other entities, and financial statements need to disclose related-party transactions, remuneration of directors and key managerial personnel, among others.
Class Action Suits
For the first time, provisions for class action suits were introduced in India, allowing shareholders and depositors to claim damages or demand suitable action against the company for any fraudulent, unlawful, or wrongful act
Conclusion
Satyam Scandal shatters the whole corporate government and took some important action towards the scandal. A new reforms occurs in corporate government and they will try that like this scandal never will repeat.
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