01-09-2012, 04:57 PM
SATYAM: BROTHERLY DEMISE THE RISE AND FALL OF RAMALINGA RAJU
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EXECUTIVE SUMMARY
The Satyam Computer Services’ scandal brought to light the importance of ethics and its
relevance to corporate culture. The fraud committed by the founders of Satyam 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 from Enron to the recent financial crisis
have time and time again proven that there is a need for good conduct based on strong ethics.
In this research paper, we examine in detail the gross negligence of stakeholder concerns and
over indulgence of key management on a personal and organizational level in immoral practices
for personal benefit. We also assess the implications of ethics in the business environment. We
then delve into the ethical dilemmas faced by the executives at Satyam, apply Hosmer’s
framework to moral decision‐making, and suggest alternatives to handle such moral
uncertainties. Finally, we conclude by providing recommendations for ethical code of conduct
in organizations and the need to foster a culture of integrity and trust.
BACKGROUND
In order to evaluate and understand the severity of Saytam’s fraud, it is important to
understand factors that contributed to the decisions made by the company’s executives. First, it
is important to understand India’s economic growth within the context of the global economy.
Second, it is necessary to detail the rise of Satyam as a competitor within the global IT services
marketplace. . And, finally, it is helpful to evaluate the driving force behind Satyam’s decisions:
Ramalinga Raju.
INDIA IN THE GLOBAL ECONOMY, 2003‐PRESENT
Brazil, Russia, India and China have solidified their place in the global economy. Posited by
Goldman Sachs chief economist, Jim O’Neil, these nations, commonly referred to as the BRIC
Nations, were believed to emerge as the four dominant emerging economies of the twenty‐first
century.i In 2003, they possessed one‐quarter of the world’s land coverage; approximately 45%
of the world’s population; and a collective gross domestic product of $3.3 trillion.ii By 2009,
these nations nearly tripled their gross domestic product.iii Together, the BRIC Nations are now
the largest bloc of emerging national economies within the global economy, outperforming
other emerging markets worldwide. By 2025, economists have predicted these four economies
would be half the size of the combined G6 (USA, Japan, Britain, German, France and Italy) and,
by 2039, could overtake the G6.iv They are fixtures in today’s global economy.
RAMALINGA RAJU AND THE SAYTAM SCANDAL
The Satyam scandal is a classic case of negligence of fiduciary duties, total collapse of ethical
standards, and a lack of corporate social responsibility. It is human greed and desire that led to
fraud. This type of behavior can be traced to: greed overshadowing the responsibility to meet
fiduciary duties; fierce competition and the need to impress stakeholders especially investors,
analysts, shareholders, and the stock market; low ethical and moral standards by top
management; and, greater emphasis on short‐term performance.
Greed for money, power, competition, success and prestige compelled Mr. Raju to “ride the
tiger,” which led to violation of all duties imposed on them as fiduciaries – the duty of care, the
duty of negligence, the duty of loyalty, the duty of disclosure towards the stakeholders.xxvi
According to CBI, the Indian crime investigation agency, the fraud activity dates back from April
1999, when the company embarked on a road to double‐digit annual growth. As of December
2008, Satyam had a total market capitalization of $3.2 billion dollars.