Q15. In the light of the Satyam Scandal (2009), discuss the changes brought in corporate governance to ensure transparency and accountability.

Model Answer:

Introduction

The Satyam scandal involved the company's founder and chairman, Ramalinga Raju, confessing to inflating the company's revenue, profits, and assets by nearly $1 billion. This scandal undermined investor confidence and raised questions about the integrity of financial reporting in India. 

Body

Changes brought about in corporate governance after the Satyam Scandal 

1. The Companies Act, 2013:
   • Introduced stricter regulations for corporate governance, including the definition of the roles and responsibilities of the board of directors.
   • Mandated a minimum number of independent directors on the board to ensure unbiased oversight.
2. Securities and Exchange Board of India (SEBI) Regulations: SEBI revised its listing obligations and disclosure requirements, ensuring greater transparency and timely reporting of financial statements.
3. Strengthening the Role of the Board of Directors: Independent directors were given more responsibility in overseeing management decisions and ensuring adherence to ethical practices. 
4. Adoption of International Financial Reporting Standards (IFRS): Encouraged transparency and consistency in financial reporting, improving comparability across companies.
5. Mandatory CSR Compliance: The Companies Act, of 2013 mandated certain companies to spend a minimum percentage of their profits on social responsibility initiatives, promoting ethical practices and accountability. 
6. Improved Disclosure Norms: Companies are now required to disclose more information regarding their financial performance, related party transactions, and risk management strategies.

Conclusion

The Satyam scandal significantly influenced the corporate landscape in India, leading to the establishment of a more robust governance framework aimed at preventing similar incidents in the future.  

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