Magazine article Journal of Services Research

Corporate Governance and International Best Practices: The Case of Satyam

Magazine article Journal of Services Research

Corporate Governance and International Best Practices: The Case of Satyam

Article excerpt


Corporate Governance (CG), all over the world, is aimed at making activities of corporations visible and honest, (Martin, 2009) and the practices around corporate governance are designed such that they facilitate consistent monitoring of "top manager's strategic decisions" (Hitt et al, 2001). The ?Institute for Corporate Governance', Dubai describes CG as "the system by which business corporations are directed and controlled". The institute also highlights that CG norms offer a guideline for responsibilities and rights, to all stakeholders, including Board of Directors, Shareholders, Business Managers and all stakeholders. This helps an organization in achieving the dual purpose of setting ethical goals and monitoring their implementation, on a regular basis( Smith, 2009). Clearly defined corporate governance policies help the organizations in identifying appropriate management institutions that shall govern the corporation (Nakano, 2007). This eases the execution of stringent practices within the organization and empowers various stakeholder groups for the purpose of whistle-blowing (the process of reporting fraudulent and unethical practices within a corporation). When CG practices are consistently adhered to, within a corporation, it leads to enhanced trust, of investors, in an organization, thereby leading to higher economic growth (Millsttein, 2005), not only at the organizational level but also at the national level.

Corporate Governance has received special attention from all over the world after scandals at Enron Corporation (USA), Adelphia Communication Corporation (USA), The BCCI Bank (UK), Robert Maxwell Pension Funds (UK), the Harshad Mehta Share Scam( India) and Satyam Computer Services Limited( India). Furthermore, after the global financial meltdown (2007-2010) and turmoil at Lehman Brothers, Morgan Stanley, Goldman Sachs etc, it is evident that lack of stringent CG norms has had implications on economies as strong as US and UK. It hence, becomes essential to understand the importance of corporate governance because it offers, to corporations, a framework, which is established on ethical conduct, morals and values (Kumar, 2008). Countries like India and China, that are global attractions for future investments (Keffer, 2007), must guard themselves from any further fraudulent incidents so that foreign institutional investors and other global corporations see these economies as a safe zone to initiate their businesses. Organizations must learn from International players and implement correct and calculated CG initiatives, which would lead them towards a strong spot on the global map.

In the discussed backdrop, the aim of this papers is to highlight the Corporate Governance mandates (and their adherence) in many developed economies of the world, highlighting the position and compliance, of the developing economies, to the CG codes and practices. The paper futher propeses, recommendations to increase efficiency of the countries' regulatory oversight. This is achieved by taking into focus, the trail of incidents around the case of Satyam Computer Services Limited, that witnessed a scam amounting to USD 1.04 billion (Murthy, 2010), in the year 2008.


The case study is based on secondary research and focuses on the CG practices of three countries. The practices currently used by developed countries, like USA and UK, have been studied with the objective to establish an understanding of the key areas that are imperative for a corporation's growth leading to social cohesion (Hitt et al, 2001). These include the measurement of CG norms on three broad criteria:Corporate Governance and ownership functions, accounting and financial reporting and other regulations (Ghosh, 2009). These factors were also studied because literature review suggests that the World Bank, IMF and OECD require the Asian nations to address the shortcomings in CG (Sharma et al, 2008). Due to the pertinent vastness of the subject in consideration, only prominent practices followed by each country were highlighted with the aim of drawing out the best practices across the globe. …

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