ANALYSING THE ASPECTS OF CORPORATE GOVERNANCE

FAILURE IN THE LIGHT OF SATYAM COMPUTERS FIASCO

ABSTRACT.
Scandals are often the “tip of the iceberg”. They represent the “visible‟ catastrophic failures.
An attempt is made in this paper to examine in-depth and analyse India‘s Enron, Satyam
Computer‘s “creative-accounting” scandal. Their scandal/fraud has put a big question mark
on the entire corporate governance system in India. In public companies, this type of
creative‘accounting leading to fraud and investigations are, therefore, launched by the various
governmental oversight agencies. The accounting fraud committed by the founders of Satyam
in 2009 is a testament to the fact that ―the science of conduct is swayed in large by human
greed, ambition, and hunger for power, money, fame and glory. Scandals have proved that
there is an urgent need for good conduct based on strong corporate governance, ethics and
accounting & auditing standards. Unlike Enron, which sank due to agency‘problem, Satyam
was brought to its knee due to tunnelling‘effect? The Satyam scandal highlights the
importance of securities laws and CG in emerging markets. Indeed, Satyam fraud spurred the
government of India to tighten the CG norms to prevent recurrence of similar frauds in future.
Thus, major financial reporting frauds need to be studied for lessons-learned‘and strategies-
to-follow‘to reduce the incidents of such frauds in the future. The increasing rate of white-
collar crimes -demands stiff penalties, exemplary punishments, and effective enforcement of
law with the right spirit.

In this paper, I have taken up Satyam Computer Services Ltd, the fourth biggest IT firm in
India as a case sample and studied the failures of corporate governance at different layers
which led to a collapse of this enormity. Not only were there failures at the narrow level, but
also at the decision-making level. With no fast code for corporate governance in India, the
company futile to go after the industry benchmark best practices and as a consequence,
distorted.
This learning would be helpful in identifying the different kind of failures in a family owned
business-like Satyam and to policy makers in designing and implementing corporate
governance frameworks for professionally managed as well as family managed businesses
like Satyam.
Keywords: corporate governance, principles, failure, scandals, stakeholders.
 INTRODUCTION

The concept of Corporate Governance (CG) is more than a decade old in India. However, the
inadequacy and inefficacy of the governance framework in the country has been espoused by
the massive corporate disaster—Satyam. The fiasco has brought into limelight the inherent
shortcomings in the present corporate regulatory system. ‘Satyam’ that means ‘truth’ in
Sanskrit will always be remembered for, perhaps, the largest corporate scam to engulf this
nation and which may carry the label of ‘India’s Enron’ 1. Possibly, the only silver lining of
this corporate catastrophe is to expose the hardcore truth of the extant CG scenario in India to
the millions of stakeholders.

Corporate Governance is concerned about promoting corporate fairness, transparency and

accountability. Corporate governance refers to the set of systems, principles and processes by
which a company is governed. Corporate Governance is essentially all about how
corporations are detected, managed, controlled and held accountable to their shareholders. It
refers to combination of laws, rules regulations procedures and voluntary practices to enable
the companies to maximize the share of all the stakeholders. It should lead to increasing
customer satisfaction, shareholder value and Wealth.

Karl Marx said "Business is all green, only philosophy is grey". He meant that business is all
about profits and Gains to its rich owners and discomforts for all other sectors of society who
are at the receiving end of the business. But we have to accept the fact that progress in the
world would not have been possible without entrepreneurship and business which involves
risk and planning.

Definitions of Corporate Governance vary widely. Corporate Governance is about promoting

corporate fairness, transparency and accountability. It is about commitment to values, about
ethical business conduct and about making a distinction between personal and corporate
funds in the management of a company. Corporate Governance consists of procedures and
processes according to which an organisation is directed and controlled. The Corporate
Governance structure specifies the distribution of rights and responsibilities among different
participants in the organisation such as board, managers, shareholders and others stakeholders
and lays down the rules and procedures for decision making.
1
Afasaripour A, “Corporate Governance Convergence: Lessons from the Indian Experience”, Northwestern
Journal of International Law and Business, Vol. 29, No. 2, (335-402, 2009).
In this backdrop, this paper makes an effort to look at events that precipitated the Satyam
fiasco and the loopholes in the system that enabled the fraud to occur....

WHAT IS CORPORATE GOVERNANCE?

Defining Corporate Governance is not an easy task as it can be looked on based on a variety
of perspectives2 . Hence there exist several definitions of corporate governance. Corporate
governance can be defined by narrowly confining to a particular aspect like the role of the
Board of Directors for ensuring accountability of the senior management. It can also be
defined form a broad perspective by taking into consideration the societal aspects.

As Vasudha Joshi in her book3 says that “Some narrow definitions make corporate
governance a concern of no one else but the company secretary while the broader ones make
it an important public policy issue”. For the purpose of this project and to derive an
operational definition, we need to look to how corporate governance has been defined across
different jurisdictions. This can be looked in the following manner:

UNITED KINGDOM (U.K.) Cadbury Committee4 : The committee defined corporate

governance “as the system by which companies are directed and controlled”. This definition
is the most concise form of definition of corporate governance. UNITED STATES (U.S.)

Business Roundtable Report5: This report says that “Corporate Governance is not an
abstract goal, but exists to serve corporate purposes by providing a structure within which
stockholders, directors and management can pursue most effectively the objectives of the
corporation.”

INDIA

SEBI Committee on Corporate Governance6: The committee defines Corporate Governance

as the “acceptance by the management of the inalienable rights of shareholders as the true
owners of the corporation and their own role as the trustees on the behalf of the
shareholders. It is about commitment to values, about ethical business conduct and about
making a distinction between personal and corporate funds in the management of a
company.”

INTERNATIONAL ORGANIZATIONS
Organization for Economic Cooperation and Development (OECD)7: These principles define
Corporate Governance in the following terms:

“Corporate Governance is affected by the relationships among participants in the

governance system. Controlling shareholders, which may be individuals, family holdings,
bloc alliances, or other corporations, acting through a holding corporation or cross
shareholdings, can significantly influence corporate behaviour. (…) Corporate Governance
is only part of the larger economic context in which firms operate, which includes, for
examples, macroeconomic policies and the degree of competition in product and factor
markets. The Corporate Governance framework also depends on the legal, regulatory, and
institutional environment. In addition, factors such as business ethics and corporate
awareness of the environmental and societal interests of the communities in which it operates
can also have an impact on the reputation and long-term success of a corporation.”

From the above quoted definitions, we can observe that the way in which “Cadbury Report” 8

and “OECD Principles of Corporate Governance” 9 defines Corporate Governance focuses on

the general principles around which the businesses are expected to operate to assure proper

governance. On the other hand, the Report of SEBI Committee on Corporate Governance 10
focuses on the role that is to be played by the management and the capacity they have to act
in so as to ensure that proper reliance is paid to the principles safeguarding the interest of the
shareholders.
ROLE PLAYED BY CORPORATE GOVERNANCE

After defining corporate governance, the next question that comes to our mind is what for we
should have corporate governance i.e. what is the role of corporate governance? The role of
corporate governance can be looked in the following manner:

Corporations have their distinct personality and identity. When it comes to the manner in
which companies work, it is through the individuals that forms a part of the management,
who are held responsible for their actions. Companies seek capital from the market by
floating the shares by the way of Initial Public Offer (IPO). For doing so the company has to
first get listed on a stock exchange, where the shares are bought and sold by the shareholders.
Stock exchanges are regulated by Securities and Exchange Board of India (SEBI) which is a
statutory body of the Indian government. SEBI has prescribed by the way of Clause 49 of the

Listing Agreement11, the mandatory and non-mandatory requirements pertaining to

“Corporate Governance” (this finds special mention in the coming pages of the project). For
the protection of the investors (shareholders), who may not be aware of the actual financial
and other information about the company, these requirements come for their safeguard. As
any company seeking listing on the stock exchange has to furnish all the information asked
for in the Clause 49 of the listing agreement, it is easy to cross check the creditworthiness of
the company.
If we take the vast canvas of corporate governance, we can say that the role of corporate
governance is to achieve efficiency, transparency and accountability with in the corporation.
It aims at setting up a proper and viable relationship amongst the various organs within the

corporation.12

Corporate Governance mechanisms installed in our country calls for “transparency” by the
way of proper disclosure of the information pertaining to the working and management of the
entity. It is not only about proper disclosure, which is mandatory on the part of the company
but is also about the role played by the chief actors in ensuring proper compliance of the
mechanism. This can be reflected in the recent “Satyam scandal”, in light of the fact that
before Mr. Ramalinga Raju revealed the fact, Satyam received “Golden Peacock Global

Award for Excellence in Corporate Governance”13. Hence, paying reliance to the mandatory
guidelines issued by SEBI on paper is very different from actual practise, that involves a
proper role played by the actors like independent directors, auditors etc. Many corporations in
India have moved towards gaining the confidence of investors by following stricter
mechanisms as to corporate governance as they are aware that doing so is the need of the
hour.
Satyam Fiasco Revisited
On December 16, 2008, the Satyam Board met to decide on the investment of $1.47 bn in
Maytas Properties and Maytas Infrastructure, both closely held companies under the
controllership of Ramalinga Raju (also Chairman of Satyam) and engaged in the completely
unrelated business of real estate development. The proposal was cleared by the Board which
had more than 50% representation of non-promoter directors on the Board. However, this
Board decision evoked a massive adverse reaction at the bourses and the company’s stocks
plummeted on the US stock exchanges. Market analysts perceived the proposal as a strategy
to siphon off resources from Satyam into family-run business ventures. This created panic at
the company’s headquarters and the proposed investment was called off at a reconvened
meeting of the Board on the same day (Garg, 2008). The next two days witnessed hectic
activity at Satyam’s headquarters. Four directors on the Board that included the non-
executive director Krishna Palepu and three independent directors Mangalam Srinivasan,
Vinod Dham and M Rammohan Rao, all respected personalities in corporate circles, tendered
their resignation. It was later revealed that it was the last ditch effort of saving Satyam
through the Maytas deal. It boomeranged on Raju and the corporate demise of Satyam was
inevitable and imminent. Raju had exhausted all his options leading to his confessional
statement while tendering his resignation from the Board (India Knowledge@Wharton,
2009).
Raju’s resignation was immediately followed by that of Satyam’s CFO, Srinivas Vadlamani.
Ramalinga Raju and his brother, Rama Raju, the Managing Director of Satyam, were arrested
on January 9, 2009. Satyam’s Board was disbanded by the Government of India acting
through the Company Law Board. An interim Board was appointed in proceedings on
January 9/10/11, 2009 and an investigation into the affairs was initiated by Securities
Exchange Board of India (SEBI). Committed efforts by the interim Board to find an
appropriate suitor bore fruit and the deck was cleared for the takeover of Satyam by Tech
Mahindra, in April 2009 (Singh and Kumar, 2009).

(1) Induction of independent directors on the board;

(2) Constitution of Audit Committees with appropriate overseeing functionalities and powers
and Auditors;
(3) Transparency and disclosures; and
(4) Certification of accounts and related statements by CEOs and CFOs constitute the four
limbs of most CG models. Administration of the CG regulatory framework usually
manifested through statutory provisions dictating implementation of this set of axioms. It is
therefore logical and coherent to examine the failure of CG in Satyam with reference to each
of these premises.
Board and Independent Directors (IDs)
The unfolding of events at Satyam has put the concept of ‘Independent Directors’ as a device
of administering CG to serious scrutiny. Satyam had duly complied with the provisions of
Clause 49 of the Listing Agreement insofar as they relate to IDs—the Satyam Board
comprised of 11 directors, of which six were non-executive directors (five independent
directors), four of them were academicians, one former Cabinet Secretary and one former
CEO of a technology company. Analysts commented that the passivity of these directors in
the occurrences at Satyam can, at best, be described as callous negligence bordering on
‘collusion’ with the perpetrators of India’s largest corporate fraud. The following points were
raised to support the above argument of negligence.
• Investigations have revealed that Raju and Co., were dishing out fabricated accounts to the
Board for the last six years (Aneja, 2009) and yet there subsists no evidence of any adverse
recording by any of the directors including the IDs.
• The proposed investment in Maytas that was placed for consideration at the Board meeting
of December 16, 2008 had sufficient ingredients to arouse the curiosity (read suspicion) for
the following reasons (Prasad and Srinivasan, 2008; and Chandrasekhar, 2009).
a) the ownership structure of Maytas (both investee firms were closely held companies
promoted by family members of Ramalinga Raju);
b) the investee companies were engaged in the business of real estate development that could
not, even by extended imagination, be expected to lead to synergistic benefits;
c) the sheer magnitude of the investment (being $1.47 bn); However, there seems to be no
record of any of the Board members having expressed any reservations about the deal or
otherwise qualified his opinion thereon.
• The meeting at which the impugned deal was adopted was convened at a three day advance
notice and the agenda thereof was circulated only half a day earlier (Reddy and Mohan,
2009). Listing guidelines, therefore, do not seem to be adhered to. Nevertheless, the directors
seemed to be unfettered by the antics of Raju;
• Whether the proposed deal attracted the provisions of Section 293 and/or Section 372 read
with Section 17 of The Companies Act, 1956 would have depended on the various specific
parameters elucidated therein. All the same, ‘good governance’ unambiguously decrees that
deals of such dimensions that would significantly, if not completely, reshape the destiny of
the company, should go to the shareholders for affirmation. However, the Board seemed to
have been kowtowing the promoters’ line (who, incidentally, held only about 3.6% of the
company’s shareholding as on January 07, 2009) to the detriment of millions of other
stakeholders of the company (Aneja, 2009).
Added to the above is the fact that market watchers in US (that merely had access to
information releases from the company) were immediately able to decipher the whole
situation as testified by the reaction of the US stock markets where Satyam’s stock prices
plummeted (Kakkad, 2008) while the company’s Board was caught unawares. It is necessary
to mention that seven cases have been filed against the members of Satyam’s Board by the
Serious Frauds Investigation Officer (SFIO) (Rahul, 2009).
The ‘fiduciary’ duty of directors vis-à-vis the company and its members is well-documented.
The law in this regard is well-settled and espoused thus in Palmer’s Company Law that “in
exercising their powers, whether general or special, directors must always bear in mind that
they are in a fiduciary position, and must exercise their powers for the benefit of the
company, and for that alone”.
From the above arguments, it is clear that Satyam’s Board and its IDs failed in its/their
fiduciary duties.
Auditing and Accounting
India’s corporate sector is emburdened with a set of well-structured accounting and auditing
provisions for compliance, administered through the following:
• The Companies Act, 1956,
• Accounting and auditing standards/pronouncements of the Institute of Chartered
Accountants of India (ICAI),
• Guidelines on disclosures and investor protection issued by the SEBI and extensive
provisions of the Clause 49 of Listing Agreement (for companies listed on stock exchanges).
Despite all these plethora of statutes, rules, regulations, procedures and guidelines, an
unscrupulous corporate operator was able to siphon off thousands of crores of rupees by
falsification of accounts that included reporting non-existent bank balances, interest receipts
that were never received, fake customer billings, borrowings on fabricated board resolutions
with consequential reporting of non-existent assets of equal magnitudes (The Financial
Express, 2009, The Hindu Business Line, 2009). All this was done under the auditor ship of
Price Waterhouse Coopers (PWC), an auditing firm with international credentials—the
manipulations are believed to have extended over a seven year period at least (Outlook India,
2009). Two partners of PWC have been arrested for their involvement in the scam (Express
India, 2009). The dimensions and modus operandi of the fraud is a clear indicator to the
culpable intentions of the auditors, commented the analysts. It is emphasized here that
exceeding a certain threshold should necessarily be taken cognizance of, as ‘culpable’,
particularly so, when such negligence leads to detriment and damage to the property of
millions of people worldwide.
With the role of the statutory auditors being suspected, it is not surprising that the ‘internal
control machinery’ also failed completely. Indian corporate laws envision an elaborate
‘internal control’ setup through the internal audit framework. In fact, the system has been
recently strengthened through the enactment of Section 292A of The Companies Act, 1956
mandating the constitution of ‘audit committees’ comprising of IDs to augment the
overseeing network of accounts and audit. These audit committees are vested with powers
equivalent to those of auditors and can examine all documents, vouchers as well as question
the personnel of the enterprise. Unfortunately, i.e., the Satyam tale seems to be an assemblage
of ‘failures and collusions’ with the internal auditors and audit committees being miniscule
constituents thereof.
Transparency and Disclosure
Deceitful entrepreneurs who use corporate structure merely as a ‘sham’ to swindle accessible
money easily from the unsuspecting investor would hardly care for the damage that their
covert strategies would cause to the investor community. The Satyam episode squarely
vindicates the above premonition. All information of significance bequeathed to the Board,
the auditors, audit committees, statutory authorities (SEBI and Registrar of Companies) and
the stock exchanges seems to have been fabricated.
However, there is another related aspect to this and that is the inadequacy of the disclosure
norms and the fallibility thereof in the hands of audacious corporate managers bent on
hoodwinking the investing public for ulterior gains. By way of illustration, there was
significant offloading of shares by Raju in the period between January 2001 to January 2009,
bringing down his stake in the company from 25.6% to 3.6%, but this cardinal pointer was
nowhere highlighted (Chandrasekhar, 2009; The Hindu Business Line, 2009). Interestingly,
the company’s top management offloaded 6.01 lakh shares in the financial year immediately
preceding Raju’s confession which also escaped attention (Aggarwal, 2008). Little more
needs to be said about the frailty of the extant norms on transparency and disclosure.

Certifications and Others

Clause 49 of listing agreement mandates that the CEO and CFO certify the financial
statements and the adequacy of internal control. It also stipulates filing of a corporate
governance report duly certified by the company’s auditors or a Company Secretary. All
these provisions seem to have been duly complied with, in Satyam case– only that the duly
certified statements were false.
This provides testimony of the deterrent effect (or rather, the lack of it) that is encapsulated in
the statutory provisions. Stated in plain words, the penalties for false certifications are grossly
inadequate and carry little incentive to relinquish massive returns that accompany such
frivolous certifications.
The Auditors Role and Factors Contributing to Fraud: -
One of the best auditing firms around the world, Pricewaterhouse Coopers, audited Satyam
books of Accounts for nearly ten years but not able to detect any financial scam. Several
Accounting and auditing experts criticized PWC for not been able to detect the fraud. PWC is
equally responsible for the fraud since it has signed all the financial statements. One
particularly concerning item that Saytam claimed to have on its Balance sheet was “Non-
Interest bearing deposits”. The view of Accounting professional was that “any reasonable
company would have either invest the money or returned the excess cash to Depositors. The
cash lying without any income with the company is a clear indication for the Auditors to
Investigate Properly. The Auditors did not independently verify with banks in which the
company claimed to have deposited. Whenever Satyam needed more income to meet analyst
expectations, it creates “fictitious” sources and it did so numerous times and the auditor PWC
never been able to detect these things. PWC audited the accounts of Satyam form June, 2000
to until the discovery of financial scam i.e. almost nine years but Merrill Lynch discovered
the fraud within 10 days. Missing these signs implied that either the auditors were grossly
inept or collusion with the Mr. Ramlinga Raju and company for committing the fraud.
Besides Auditors many other factors contributed to that financial scam like Independent
Directors, the institutional Investor Community, SEBI, Retail Investors and professional
Investors who have all the sources like models, detailed information about the company.
Greed for money, power, Success and prestige compelled Mr. Raju to do all these
manipulations. The Satyam‟s case is case of negligence of all fiduciaries like duty of loyality,
duty of disclosure towards sharholders etc. Mr Ramlinga Raju has never followed any ethical
code of conduct and corporate social responsibility. Mr Raju has done all this for maintaining
high earning per share (EPS), raise executive compensation and to sell the stake at inflated
price.
Failure of Corporate Governance in case Satyam Computers Services Ltd.:
The case study of Satyam Computers is a sheer case of failure of Corporate Governance in
India. It is really very unfortunate that within five months after winning the Global Peacock
Award, Satyam became the centrepiece of a “massive” accounting fraud. Satyam Computers
services Ltd has failed on almost every front of Corporate Governance and deceived every
Government regulator like SEBI, Registrar of Companies and Department of Corporate
Affairs. The total case of failure of reporting and misrepresentation of Facts may be divided
under three major heads. First there is a failure of Corporate Governance, Secondly there is a
Failure of SEBI and lastly there is failure of Auditors (M/s Price Waterhouse Coopers). We
are presenting these failures one by one: -
1. Failure of Corporate Governance in Satyam Computers Services Ltd: -
A. Failure of Concept of Independent Auditors: - At the time of Application of Concept of
Corporate Governance, SEBI has highlighted the role of Independent Directors in the
presentation of Financial Figures before Government that Independent Directors will present
the true and fair view of financial figures and take the active part in audit process of
Companies better than Traditional Directors, but here in this case, this concept was a total
failure.
B. Failure of the role of Audit Committee: - Audit Committee of the Satyam Computers
played hardly any role in curbing the financial misrepresentation of facts. So, another
important pillar of Corporate Governance has shattered in this case.
C. Failure of the role of CEO/CFO: - It is presented in the concept of Corporate
Governance that the CEO/CFO of the company will certify about the truthfulness and
fairness of Financial Statements of the Company but in this case the CEO/CFO of the
Company Mr.Ramlinga Raju/ Srinivas Vadlamani has certified the wrong financial position
of the Company.
D. Failure of presenting the true report on compliance of Corporate Governance in the
Financial Statements of the Company: - In case of Satyam Computers, the Annual Report
of this company included the report on the Compliance of Corporate Governance but hardly
any fact of that report was true in real sense.
2. Failure of SEBI in timely detection of this Finance Scam: -
The Security Exchange Board of India is the most powerful regulating agency of the
Government of India which has the full powers in intervening in any of the Financial Affairs
of the Companies regarding the presentation of Financial Figures and insiders trading. The
prices of the share of Satyam Computers were increased many folds but SEBI was in total
failure in detecting or even smelling any foul smell. The result of all that insider trading was
that the promoters of the Company have deliberately made money in crores by
misrepresenting the financial figures and there by increased the market value of the shares
and sold their shares at those higher values and the end result was that there was the erosion
of the funds of the common people who have invested in the shares of Satyam Computers
relying upon the financial figures of the that Company.

3. Failure of Auditors in the Due Diligence in their duties: -

M/s Pricewaterhouse Coopers is one of the best auditing firms around the Globe. This firm is
equally responsible for the financial scam since there are many factors which may work as
indicators for demanding further investigation like Cash lying with the company without any
income on that. The PWC is total fail in due diligence of their duties for example PWC never
verifies the forged statements with the bank and debtors etc. The failure of PWC can be
judged from the fact that Investment banker Merillynch found the financial scam merely in
10 days. In nutshell we can arrived at a conclusion that if PWC work with due diligence the
Satyam scam may not occurred.
Lessons and Recommendations: -
The Govt. and regulator SEBI has learned lesson from that financial scam by Mr. Ramlinga
Raju and others. The Govt. had given the power to SEBI to arrest in these types of cases.
Ministry of Company affairs made a body of retired Judges of Supreme Court and High court
named Serious Fraud Investigation Organisation (SFIO). Institute of Chartered Accountants
also barred PWC to do audit in India. ICAI will also act as a watchdog on these Auditing
firms.
Besides this SEBI has done lot of hard work in the proper implementation of Corporate
Governance in India, yet there is a lot of work which is to be done in this direction. Besides
Strengthening the SEBI more, the Government of Indian also has to take some concrete steps
in strengthening the Legal framework in India especially with regards to Indian Companies
Act 1956. Though many important provisions of listing requirements have now being
included in the Indian Companies (Amendments) Act, 2013 still there is a requirement of few
additional provisions in Companies Act with respect to the actions against wrong Financial
Reporting and Insider Trading.

CONCLUSION
Failure in corporate governance is actually a real threat to the future of any
corporation/organisation. With effective corporate governance based on core values of
integrity and trust (reputational value) who was an companies will have competitive
advantage in attracting and retaining talent and generating positive reactions in the
marketplace – if you have a reputation for ethical behaviour in today’s marketplace it
engenders not only customer loyalty but employee loyalty. Effective corporate governance
can be achieved by adopting a set of principles and best practices. A great deal depends upon
fairness, honesty, integrity and the manner in which companies conduct their affairs.
It is widely accepted that corporate entities of all sizes across the world are susceptible to
accounting scandals and frauds. Undoubtedly, various types of frauds and scams reduced the
creditability of financial information that investors use in making decisions. From Enron and
WorldCom in 2001 to Madoff and Satyam in 2009, accounting fraud has been a dominate
news item in the past decade. Perhaps, no financial fraud had a greater impact on accounting
and auditing profession than Enron, WorldCom, and recently, India’s Enron: “Satyam”.
Unlike Enron, which sank due to “agency” problem, Satyam was brought to its knee due to
“tunneling”. But it may be that the greatest impact of Enron and WorldCom was in the
significant increased focus and awareness related to fraud. As Bhasin stated (2016), “Forensic
accounting skills are becoming increasingly relied upon within a corporate reporting system
that emphasizes its accountability and responsibility to stakeholders.”
It is good to see that the Satyam case is different at least in one respect—we now have all the
details about the modus operandi of the fraud. In its recent indictment of the former
promoters and top managers of Satyam, the Securities and Exchange Board of India (SEBI)
has provided minute and fascinating details about how India’s largest corporate scam was
committed. But SEBI’s account also reveals how stupendously easy it is to pull off financial
fraud on a grand scale, even in publicly listed companies. Perpetrators often manage to evade
the long-arm of the law. When they are brought to book, the actual details of the crime get
lost in legal technicalities. And untangling the mess usually takes such a long time that, by
the time the wrongdoer is hauled up, most people have forgotten what the crime was all
about. With the legacy of the British legal system, India has one of the best CG laws but poor
implementation together with socialistic policies of the pre-reform era has affected CG.

Concentrated ownership of shares, pyramiding and tunneling of funds among group

companies mark the Indian corporate landscape (Ahmad, et al., 2010). Boards of directors
have frequently been silent spectators with the DFI nominee directors unable or unwilling to
carry out their monitoring functions. Since liberalization, however, serious efforts have been
directed at overhauling the system with the SEBI instituting the Clause 49 of the Listing
Agreements dealing with CG. In addition, the CG framework needs to be strengthened,
implemented both in “letter as well as in right spirit,” and enforced vigorously to curb white-
collar crimes.