Lessons Learned from Satyam

The media is overflowing with news on the Satyam fraud. How B Ramalinga Raju planned, controlled and innovated his managerial processes will go down as a classic case study on How to Fail in Business. Brand India has suffered. What is ironic is that Satyam was started by entrepreneurs who served as role models.

The key lesson: Corporate governance must always be on top of an organization’s agenda. Failing which, one must be prepared to risk sudden death.

Fundamentally, corporate governance implies management assuming the role of “trusteeship” with all the attendant checks and balances that can create a high performing organization. This was advocated by Mahatma Gandhi early in the twentieth century. These trustees must aim to deliver balanced results in the following dimensions:

  1. Customer satisfaction and loyalty
  2. Employee satisfaction and commitment
  3. Superior shareholder value
  4. Societal responsibility

In India, while the movement towards more effective corporate governance has gathered momentum, much remains to be done. In several cases this concept is being observed more in its form than spirit to gain respectability. There is still strong temptation to hold vital information close to the chest and present a fait accompli to the board merely for ratification. But in the case of Satyam the board was learned and well balanced. There were several global gurus of management serving as independent directors. Could their expertise not penetrate Raju’s strategy?

Performance of companies cannot be judged merely by the price of their shares in the stock market as that depends largely on perception of investors at any given time about the future prospects of a particular industry and the valuation attached to it. Satyam has dragged the entire Indian IT sector into a credibility vortex.

In the quarters to come, the essential litmus test will be on how efficiently and productively companies in the IT sector utilize resources entrusted to management for the benefit of shareholders, customers, employees and society.

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3 Comments on “Lessons Learned from Satyam”

  1. Michael Tim Says:

    I love your site!

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  2. cyril Says:

    I agree with you, The greatest asset of Satyam is it cultivated an brand of leaders. Robin Sharma in is book Greatest Guide writes the leaders of each division of Satyam are like CEO.
    Its the leadership,Customer satisfaction and committed employees who are keeping the Satyam flag high….


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