Corporate Governance Issues at Satyam Computers

The resignation followed the announcement the previous day by B. Ramalinga Raju (Raju), Founder and Chairman of India's fourth largest IT services company, Satyam Computer Services Limited (Satyam), that the company had been inflating the revenue and profit figures for past several years. In his resignation letter, Rao, who had recently resigned as independent director on the Satyam board, said, "Unfortunately, yesterday's shocking revelations (by Raju), of which I had absolutely no prior knowledge, mean that we are far from seeing the end of the controversy surrounding Satyam Computers. My continued concern and preoccupation with the evolving situation are impacting my role as dean of ISB at a critical time for the school."⁷

Another independent director, Mangalam Srinivasan⁸ (Srinivasan), had resigned from the Satyam board a few days earlier, on December 25. The resignations of these directors were the result of an aborted deal by Satyam to acquire two companies run by Raju's sons, Maytas Properties Pvt. Ltd (Maytas Properties) and Maytas Infrastructure Limited (Maytas Infra) for US$ 1.6 billion.

Satyam's board of directors had given its consent for the acquisition. However, when the acquisition was announced publicly, it received flak from the investor community, who did not find any synergies in an IT company acquiring companies involved in construction and infrastructure...