Corporate governance is defined as the system of rules, practices, and processes by which a firm is governed. It primarily involves the balancing of interests of the company’s stakeholders i.e. the shareholders, senior level management, suppliers, customers, government and other related authorities.

Corporate governance inside a company is majorly overlooked by the board of directors, auditors, chief financial officers amongst the others. Accountability goes in hand with the responsibility. When all the above-mentioned people do their task at hand correctly then it will help the company flourish more, and more investors will be attracted toward the company.

Sometimes when the management keeps things in dark about the working of the company there arises a fraud and breach of trust to the investors and the common man who has invested their hard-earned money into the company. One such scandal that forced the government to revise, restructure, add in new restrictions to the subject of corporate governance is the Satyam Scam.

Satyam Computer Services Limited was established in 1987 by B Ramalingam Raju. It was a Hyderabad based IT company. In 1988, Raju also established two more companies- Maytas Infra and Maytas Properties. Soon it became the 4th fastest growing company in India competing with Wipro, Infosys and TCS. In 1991, it was recognized as a public limited company and was listed in the Bombay Stock Exchange (BSE). In 2001, Satyam was also listed in the New York Stock Exchange (NYSE).

Reaching the heights of success, Satyam was honored with many recognitions and awards and went on to become the win the Golden Peacock Award for corporate governance by London Council in the year 2008. Mr. Raju had also become a inspiration to many. Soon he got interested into real estate as that was a booming sector therefore started buying properties all over India. Under the banner of Maytas.

Soon he started manipulating the share prices and at this point his family members started selling off their shares and a part of the shares were kept in banks as collateral security in bank for bank loans and the money was used to buy even more properties. Then he started 365 big and small firms where he appointed his friends, relatives and even the servants as directors of the so called “firms”.

Due to his rising position, he also had the information about the proposed Hyderabad Metro rail project. Now he bought land in places of the proposed plan, and he thought to sell it in future at a high price. Now to maintain and manage the situation, he started manipulating the financial statements of the company. He started creating fake invoices for services to nonexistent and fake customers. The senior management allowed any certain employees to login into the company systems.

After he managed to generate the fake invoices, he then falsified the bank statements and showed false income earned from deposits and tallied it with the bills. He showed cash reserve that was truly nonexistent. He kept doing this for 5 to 6 years. There was money made on export by raising invoices of export abroad and manipulating the FD’s.

Soon the gap widened, and it was almost becoming impossible to fill. As recession hit in 2008, it hit the real estate and the prices crashed. To fill this gap, he planned and released a statement that Satyam would be buying 51%share of Maytas Infra and 100% of that of Maytas Properties and the amount would go to the promoters of the company. In December 2008, the board of directors gave consent and all these was not disclosed to the shareholders. This decision did not go well with the shareholders, especially the institutional investors. The share prices started falling drastically and one of the investors in US filed a lawsuit regarding this as the share price there fell by 55%. As a result, he had to cancel the deal and 4 independent directors resigned from their post.

SEBI took notice of this as it was already keeping a watch on the movements of the company. As all the options failed, Mr. Raju confessed in 2009 that he had been manipulating the accounts and no board members had knowledge of the situation.


The company had a astonishingly low holding of the promoters where initially it was 8% and was reduced to 5% that dropped till 3.8%. The board of directors was always silent and never questioned Mr. Raju about the obnoxious investments. Although there were 6 non-executive directors, they did not keep a check on the misdeeds of Mr. Raju. The auditors of the company Price Waterhouse Cooper was being paid double the price to make and present a clear audit. This can be seen as a failure of the Audit committee. There were flaws in the external audit as well.


When Companies Act, 2013 was created, it included new provisions like disclosure of the promoters holdings and rotation of the auditors in regular intervals. It stated that any individual auditor cannot be appointed for a term more than 5 years. Secondly it stated that if there are 2 audit firms then their terms should not end at the same time. SEBI became stricter and diligent to avoid any further arising scams. The order in the companies were revamped in order to be more transparent and trustworthy in the eyes of the investors.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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