- Corporate Governance, Satyam, Accounting Fraud, Independent Directors, Audit Committee, Agency Theory, Foreign CEO, India.
Abstract
The confession of B. Ramalinga Raju on 7 January 2009 that the balance sheet of Satyam Computer Services Limited (Satyam) contained fictitious assets of about Rs 7,136 crore exposed the largest accounting fraud in Indian corporate history. Satyam was then India’s fourth-largest IT services firm, NYSE-listed, audited by a Big Four affiliate, and had received a corporate governance award only months earlier. This paper presents an exploratory single-case study of Satyam using secondary evidence: the promoter’s confession letter, regulatory and judicial orders, annual reports and the academic and professional literature. It reconstructs the fraud with facts and figures, analyses the failure of the board, the audit committee, the statutory auditors and the regulators through the lens of agency theory and the fraud triangle, and offers a critical assessment of the role of independent directors. It then compares Satyam with firms whose fortunes were shaped by foreign chief executives (Nissan, Olympus, Nokia, Jaguar Land Rover and Sony) to show how governance architecture conditions CEO outcomes. The paper concludes with ten lessons for boards, auditors, regulators and investors. The findings indicate that Satyam failed not for want of rules but because compliance was formal rather than substantive.