ETHICS &VALUES IN MANAGEMENT

CASE-WHAT WENT WRONG WITH THE SATYAM?

Group members(C-10)-
Abhishek singh(12121)
Ankur jain(12127)
Ritesh jaiswal(12153)
Sandeep v raju(12162)
Pappu yadav(12166)
Sarthak rohatgi(12182)
A BIOGRAPHICAL SKETCH OF RAMALINGA RAJU
 Born on September 16,1954 in a family of farmers

 He completed his B.com from Andhra loyala college at Vijayawada

 He earned an MBA degree from Ohio university, USA

 After returning to India in 1977 he started spinning and weaving mill

named Sri Satyam

 He shifted to real estate business named Satyam constructions

 In 1987 Raju founded Satyam computer service with one of his brother
in law DVS Raju
A BRIEF HISTORY OF SATYAM
• Established on 24th June 1987
• Was incorporated in 1991 as public limited company
• Period of 1997-2003 was of very high growth
• Mr. Raju was awarded with many honours

Downfall of Satyam :
• In Dec. 2008 World Bank blacklisted Satyam on the charges of –

 Providing Improper benefits to staff

 Data theft
 Bribing the staff

• On January 7, 2009 Mr. Raju confessed the wrongdoing in a letter issued

to its board directors admitting fraud !
IMPORTANCE OF ETHICS IN BUSINESS
 Ethics in business is influenced by the culture of the company

 Taking right course of action may involve rejecting short term

profits

 Benefits of ethics in business –

 Attracting customers
 Attracting investors
 Reduced “Turnover rate”
 Helps in retaining talented employees
 Creates goodwill in the market
IMPACTS AND LESSONS LEARNT
 Impacts :
• Ripple effect
• Impacts FDI

• Lessons learnt :
 Transparency should be very good
 Tighter norms for Chartered accountants
 A cap on revenues, at 10%, to an audit firm
 Independent directors should have sound technical skills
 Should have an effective “Whistle blower policy”
 Need for education on ethical values
THEORIES AND APPROACHES
1. Kohlberg Model
• Post conventional Stages:
- Stage Five: Social Contract Orientation
- Stage Six: Universal Moral Principles Orientation
 Board of Directors
- Stage One: Interpersonal Concordance Orientation

2. Theory of Universalism
 “Universalism suggests that in reaching a decision,
consider if the decision would be acceptable if everyone, in
every situation, made the same decision.”

3. Peter Drucker model

 “Above all, do no harm”
4. Laura Nash model
 What are your intentions in making this decision?
 How does these intentions compare with likely results?

5. Utilitarian theory
“moral actions are those that produce the greatest net
pleasure compared with net pain.”
 the Cost‐Benefit Analysis
 RAMALINGA RAJU’s point of view

 Individual driven unethical behavior:

 Lying

 Greed

 Bribery

 Embezzlement

 System driven unethical behavior:

 As a whole
 UNETHICAL BEHAVIOR
 Satyam’s point of view
 Increasing competition forced big corporations to do something beyond
their reach.
• Tata Consultancy Services (TCS)
• Infosys Technologies
• Wipro
 Pressure to maintain this pace of growth
 Gap became a gulf
ETHICAL ISSUES INVOLVED
 Not following corporate governance norms
 Tampering the financial data
 Misleading the shareholders fund
 Putting self-interest at the expense of shareholder’s interests
ETHICS IN BUSINESS

 Ethical choices are difficult for businessman because :

 Bottom line is unforgiving in today’s competitive business world
 Pressure for results is much too higher
RECOMMENDATION FOR RESOLVING DILEMMA
A three-step strategy that shows you how to combine them.
Step 1:Mr. Raju should have analysed the consequences of his wrong
doings.
He should have thought the following questions-
• Who will be helped by what you do?
• Who will be hurt?
• What kind of benefits and harms are we talking about?

Step 2: Mr Raju should have analysed his actions

 How do they measure up against moral principles like honesty,
fairness, equality, respecting the dignity of others, respecting people's
rights, and recognizing the vulnerability of individuals weaker or less
fortunate than others?
• Do any of the actions that you're considering "cross the line," in terms
of anything from simple decency to an important ethical principle?
• If there's a conflict between principles or between the rights of
different people involved, is there a way to see one principle as more
important than the others?
• What you're looking for is the option whose actions are least
problematic.

Step 3: Make a Decision

After careful analysis of both the steps given above, one should go for the
one which, fits well into the situation.
RECOMMENDATIONS TO AVOID TRAGEDIES LIKE
SATYAM IN THE FUTURE.
 The Satyam fiasco, makes it imperative that corrective measures
need to be taken at the earliest to stem the rot.
 Government needs to set up a Board of Audit, is empowered to
conduct surprise audit or on complaints of whistle-blowers.
 The same auditor should not be allowed to continue for more
than 3 years with a Company.
 Cross-directorships must be banned.
 Incentives should be provided to Whistle-blowers.
 Laws should be made more stringent.
RECOMMENDATIONS TO AVOID TRAGEDIES LIKE
SATYAM IN THE FUTURE.
 The Department of Corporate Affairs should create a pool of
independent directors with high integrity and prescribe for them
adequate remuneration.
 The conviction rate in corporate frauds, currently under a
pathetic 5 per cent, must be improved.
 The law and administration should come down heavily on
breach of trust and fraud.
CONCLUSION
 Satyam scam is unparalleled in the corporate history of
India, and as some keen corporate observers point out, the world
itself.
 The idea of a corporation, and the values and principles that
should guide its governance have hardly been imbibed by
promoters.
 An careless administration, ill-equipped regulatory system and
terribly delayed justice delivery process only make things easier
for the corporate crooks to make a killing.
 Corporate governance framework needs to be implemented in
letter as well as spirit. The increasing rates of white collar crimes
demands stiff penalties and punishment.
 Creating an awareness of the large consequences of small lies
may help some to avoid this trap.