CASE STUDIES ON CORPORATE GOVERNANCE WITH SOLUTION

CASE STUDY - 1
SATYAM SCANDAL (2009): UNRAVELING CORPORATE DECEPTION
Satyam Computer Services, once considered a stalwart in the Indian IT industry, faced a catastrophic scandal in 2009.
The founder and chairman, Ramalinga Raju, admitted to orchestrating a massive financial fraud, disclosing inflated
profits and fictitious assets.
Background: Satyam's financial statements were manipulated to show non-existent cash reserves, and the company's
share prices plummeted after the revelation. The scandal not only shook the confidence of investors and clients but also
raised questions about corporate governance in India.
Questions:
I. Ethical Lapses and Corporate Governance:
Do you believe the Satyam scandal was primarily an outcome of ethical lapses or a failure in corporate
governance? Justify your perspective, considering the actions of the company's leadership.
II. Impact on Stakeholders:
Analyze the impact of the Satyam scandal on various stakeholders, including investors, employees, and clients.
How did the revelation of financial fraud affect trust and relationships with these stakeholders?
III. Corporate Governance Reforms:
What reforms and changes in corporate governance mechanisms could have potentially prevented or detected the
financial fraud at Satyam? Discuss specific measures that might enhance transparency and accountability in
organizations.
IV. Role of External Auditors:
Evaluate the role of Satyam's external auditors in the scandal. What measures could be taken to improve the
effectiveness of external auditors in detecting fraudulent activities within companies?
V. Lessons for Corporate Governance:
Identify key lessons that other companies and regulatory bodies can learn from the Satyam scandal. How can
these lessons contribute to improving corporate governance practices in India and globally?
This case study delves into the infamous Satyam scandal, inviting an exploration of the ethical and governance
dimensions that led to one of the most significant corporate frauds in Indian history.
Solution for the Satyam Scandal Case Study: Unraveling Corporate Deception
I. Ethical Lapses and Corporate Governance:
Solution: The Satyam scandal was a result of both ethical lapses and corporate governance failures. The
leadership's unethical behavior, including falsification of financial statements, highlights a severe failure in
ethical standards. Additionally, weaknesses in corporate governance mechanisms allowed such misconduct to
persist.
II. Impact on Stakeholders:
Solution: The Satyam scandal had a devastating impact on stakeholders. Investors faced financial losses,
employees experienced job insecurity, and clients lost trust. To rebuild confidence, companies should prioritize
transparency, ethical conduct, and robust governance, ensuring stakeholders are well-informed and protected.
III. Corporate Governance Reforms:
Solution: Reforms should focus on:
1. Strengthening board independence with competent and unbiased directors.
2. Implementing regular and thorough audits, including internal and external scrutiny.
3. Establishing whistleblower mechanisms for reporting unethical behavior.

Case Studies on Corporate Governance 1

 4. Enhancing transparency in financial reporting.
IV. Role of External Auditors:
Solution: External auditors need to:
1. Conduct more rigorous and independent audits.
2. Rotate audit firms regularly to prevent conflicts of interest.
3. Collaborate with internal audit teams for comprehensive assessments.
4. Emphasize ethical conduct and report any suspicions promptly.
V. Lessons for Corporate Governance:
Solution: Lessons from the Satyam scandal include the need for:
1. Clear separation of CEO and Chairman roles.
2. Regular, independent audits and reviews of financial practices.
3. Strengthened regulatory oversight and enforcement.
4. Robust corporate culture emphasizing ethics and integrity.

CASE STUDY - 2
KETAN PAREKH SECURITIES SCAM (2001): UNRAVELING FINANCIAL MANIPULATION
Ketan Parekh, a stockbroker in India, orchestrated a significant securities scam in 2001 that sent shockwaves through
the financial markets. Operating with a nexus of banks and entities, Parekh engaged in manipulative trading practices,
inflating stock prices, and creating artificial demand. The scam eventually led to a market meltdown, exposing systemic
vulnerabilities.
Background: Parekh used borrowed funds to create a web of interconnected entities, engaging in circular trading to
artificially boost stock prices. His actions led to a speculative bubble, especially in technology and media stocks. When
the bubble burst, it resulted in substantial financial losses for investors and eroded market confidence.
Questions:
I. Manipulative Trading and Market Integrity:
Do you believe Ketan Parekh's manipulative trading practices primarily targeted personal gains or were they
intended to compromise the overall integrity of the financial market? Justify your stance considering the impact
on market stability.
II. Impact on Investors and Institutions:
Analyze the impact of the Ketan Parekh securities scam on individual investors, institutional investors, and
financial institutions. How did the aftermath of the scam affect their trust in the financial system?
III. Regulatory Oversight and Failures:
Evaluate the role of regulatory bodies in preventing and addressing the securities scam. What regulatory
oversights or failures contributed to the success of Ketan Parekh's fraudulent activities?
IV. Risk Management Practices:
Assess the risk management practices employed by financial institutions that were involved in the scam. What
measures could have been implemented to identify and mitigate the risks associated with speculative trading?
V. Recovery and Rebuilding Confidence:
Propose strategies for the financial authorities to facilitate the recovery process and rebuild investor confidence
after a major securities scam. How can regulatory reforms contribute to preventing similar incidents in the future?
This case study delves into the Ketan Parekh securities scam, prompting an exploration of the ethical, regulatory,
and risk management dimensions that played a role in the financial crisis of 2001.

Case Studies on Corporate Governance 2

 Solutions for case study on Ketan Parekh Securities Scam (2001):
I. Manipulative Trading and Market Integrity:
Solution: Ketan Parekh's manipulative trading practices were primarily aimed at personal gains. While the impact
on market integrity was severe, his actions were driven by a desire for personal wealth and success. Adequate
penalties and legal consequences should be enforced to deter such behavior.
II. Impact on Investors and Institutions:
Solution: The Ketan Parekh securities scam had a profound impact on investors who faced substantial financial
losses. Institutional investors experienced a decline in trust in financial markets. Regulatory bodies should work
towards restitution for affected investors and implement measures to restore confidence.
III. Regulatory Oversight and Failures:
Solution: Regulatory bodies failed to detect and prevent Ketan Parekh's manipulative activities. Reforms should
include enhanced surveillance mechanisms, increased transparency in trading activities, and regular audits to
identify irregularities promptly. Regulatory bodies should collaborate to share information and strengthen
oversight.
IV. Risk Management Practices:
Solution: Financial institutions involved in the scam lacked effective risk management practices. Measures such
as periodic stress testing, diversification of portfolios, and strict adherence to risk limits should be implemented.
Institutions must prioritize risk management to mitigate the impact of speculative trading.
V. Recovery and Rebuilding Confidence:
Solution: To facilitate recovery and rebuild confidence, financial authorities should:
1. Enforce stringent penalties on those involved in fraudulent activities.
2. Implement investor awareness programs to educate about potential risks.
3. Enhance transparency in market operations and strengthen regulatory frameworks to prevent future scams.
4. Collaborate with international regulatory bodies to share best practices and enhance global market integrity.
By implementing these solutions, regulatory bodies, financial institutions, and investors can collectively work towards
preventing and mitigating the impact of fraudulent activities in financial markets.

CASE STUDY - 3
SARADHA CHIT FUND SCAM (APRIL 2013): UNRAVELING FINANCIAL DECEIT
In April 2013, the Saradha Group, a conglomerate operating primarily in Eastern India, faced a severe financial scandal
that revealed the operation of a Ponzi scheme. The mastermind, Sudipta Sen, duped thousands of investors through chit
funds, causing significant financial distress and leading to a major regulatory crisis.
Background: Sudipta Sen, the chairman of Saradha Group, exploited the regulatory gaps in chit fund operations.
Operating under the guise of a legitimate investment scheme, the group attracted investors with promises of high
returns. However, instead of investing in legitimate ventures, Sen used funds from new investors to pay returns to earlier
participants, creating a classic Ponzi scheme.
Questions:
I. Ethical Lapses and Regulatory Oversight:
Were the actions of Sudipta Sen in the Saradha Chit Fund Scam primarily an outcome of ethical lapses, or did
regulatory oversights contribute significantly to the perpetuation of the fraudulent scheme? Justify your
perspective, considering the roles of both the company's leadership and regulatory bodies.
II. Impact on Stakeholders:
Analyze the impact of the Saradha Chit Fund Scam on various stakeholders, including investors, agents, and local
communities. How did the revelation of the fraudulent scheme affect trust and relationships with these
stakeholders?
Case Studies on Corporate Governance 3
III. Regulatory Failures and Reforms:
Evaluate the regulatory failures that allowed the Saradha Chit Fund Scam to persist. What reforms and changes in
regulatory frameworks could have potentially prevented or detected the fraudulent activities of the Saradha
Group?
IV. Role of Auditors and Due Diligence:
Assess the role of auditors and due diligence procedures in detecting financial irregularities within the Saradha
Group. What improvements or changes could be made to the auditing process to enhance the ability to uncover
fraudulent schemes in financial organizations?
V. Lessons for Financial Oversight:
Identify key lessons that can be drawn from the Saradha Chit Fund Scam for other financial institutions,
regulatory bodies, and investors. How can these lessons contribute to strengthening financial oversight and
protecting investors in the future?
This case study examines the Saradha Chit Fund Scam, inviting an analysis of ethical considerations, stakeholder
impacts, regulatory failures and reforms, the role of auditors, and lessons for financial oversight.
Solutions for the case study on Saradha Chit Fund Scam:
I. Ethical Lapses and Regulatory Oversight:
Solution: The Saradha Chit Fund Scam was a result of both ethical lapses by Sudipta Sen and significant
regulatory oversights. While Sen orchestrated the fraudulent scheme, regulatory bodies failed to detect and
prevent the scam. Reforms should address both ethical conduct within companies and strengthen regulatory
frameworks.
II. Impact on Stakeholders:
Solution: The Saradha Scam had a devastating impact on various stakeholders. Investors faced financial losses,
agents suffered reputational damage, and local communities were adversely affected. To rebuild trust, restitution
for affected investors and support for affected communities should be prioritized.
III. Regulatory Failures and Reforms:
Solution: Regulatory failures in the Saradha Chit Fund Scam necessitate comprehensive reforms, including:
1. Strengthening regulatory oversight to detect and prevent Ponzi schemes.
2. Enhancing due diligence requirements for financial institutions.
3. Educating investors about potential risks and conducting regular audits of financial entities.
IV. Role of Auditors and Due Diligence:
Solution: Auditors and due diligence procedures failed to uncover the Saradha scam. Improvements should
include:
1. Implementing stringent auditing standards for financial entities.
2. Encouraging independent third-party audits to enhance transparency.
3. Enforcing penalties for auditors who neglect to uncover fraudulent activities.
V. Lessons for Financial Oversight:
Solution: Key lessons from the Saradha Scam include:
1. Prioritizing investor protection in regulatory frameworks.
2. Conducting regular risk assessments and audits to detect financial irregularities.
3. Enhancing coordination between regulatory bodies to share information and strengthen oversight.
Implementing these solutions will contribute to preventing similar financial scams, protecting investors, and
strengthening the oversight of financial entities.

Case Studies on Corporate Governance 4

CASE STUDY - 4
CORPORATE GOVERNANCE AND ETHICAL ISSUES
Meera, the CEO of a prominent Indian manufacturing company, is faced with a decision regarding the appointment of
new directors to the board. The company has been thriving, but recent financial irregularities have come to light.
Meera is under pressure from the current board to appoint individuals with close personal ties, potentially compromising
the board's independence. She is torn between maintaining the company's success and upholding corporate governance
principles.
Questions:
I. Ethical Dilemma:
Is it ethical for Meera to appoint directors with personal connections, compromising board independence, despite
the pressure from the current board? Justify your response based on corporate governance principles.
II. Upholding Corporate Governance Principles:
How can Meera balance the need for continued business success with the imperative of upholding corporate
governance principles? Discuss specific actions she can take to ensure integrity in the board appointment process.
III. Stakeholder Impact:
Identify the stakeholders involved and assess how each stakeholder might be affected by Meera's decision to
either prioritize board independence or succumb to pressure for personal connections.
IV. Corporate Governance Mechanisms:
What corporate governance mechanisms could Meera implement to prevent and address financial irregularities
within the company? Discuss how these mechanisms contribute to building trust among stakeholders.
V. Long-term Consequences:
Analyze the potential long-term consequences for the company's reputation and performance based on Meera's
decision. How might prioritizing corporate governance impact the company's future success and stakeholder
relations?
This case study addresses a corporate governance dilemma in an Indian context, focusing on the challenges faced by
a CEO in upholding principles while ensuring business success.
Solution for Case Study - Corporate Governance and Ethical Issues
I. Ethical Dilemma:
Solution: It is not ethical for Meera to compromise board independence by appointing directors based on
personal connections. Meera should prioritize corporate governance principles, ensuring that board appointments
are made based on merit, expertise, and alignment with the company's best interests.
II. Upholding Corporate Governance Principles:
Solution: Meera can balance business success with corporate governance principles by implementing a
transparent and merit-based director appointment process. She should establish criteria for director qualifications,
independence, and expertise, and involve an independent nomination committee to make unbiased
recommendations.
III. Stakeholder Impact:
Solution: Stakeholders, including shareholders, employees, and customers, benefit from Meera's commitment to
upholding corporate governance. Board independence ensures decisions are made in the company's best interest,
contributing to long-term sustainability and trust among stakeholders.
IV. Corporate Governance Mechanisms:
Solution: Meera should strengthen corporate governance mechanisms by implementing:
1. Regular financial audits to identify and address irregularities.
2. An independent and competent audit committee to oversee financial reporting.

Case Studies on Corporate Governance 5

 3. Whistleblower mechanisms to encourage reporting of unethical practices.
V. Long-term Consequences:
Solution: Prioritizing corporate governance may lead to short-term challenges, but the long-term consequences
include:
1. Enhanced reputation: Stakeholders value transparency and integrity.
2. Sustainable success: A well-governed company is more likely to withstand challenges and maintain stakeholder
trust.
These solutions emphasize the importance of upholding corporate governance principles for long-term success and
stakeholder trust, even in the face of short-term pressures.
INTERNATIONAL CONTEXT
CASE STUDY - 5
ENRON SCANDAL (2001): UNRAVELING CORPORATE DECEIT
In the early 2000s, the Enron Corporation, once hailed as an innovative and successful energy company, faced a
devastating financial scandal that shook the foundations of corporate America. The company's leadership engaged in
accounting fraud, leading to one of the largest corporate bankruptcies in history.
Background: Enron employed complex financial schemes to manipulate its financial statements, concealing debt and
inflating profits. Executives, including CEO Jeffrey Skilling and CFO Andrew Fastow, orchestrated a web of off-
balance-sheet entities to deceive investors and regulators. When the truth surfaced, Enron's stock plummeted, leading to
severe financial losses for shareholders and employees.
Questions:
I. Ethical Lapses and Corporate Governance:
Were the actions of Enron's executives primarily driven by ethical lapses, or was the scandal indicative of a
broader failure in corporate governance? Justify your perspective, considering the roles of the company's
leadership and board of directors.
II. Impact on Stakeholders:
Analyze the impact of the Enron scandal on various stakeholders, including shareholders, employees, and
creditors. How did the revelation of financial fraud affect trust and relationships with these stakeholders?
III. Corporate Governance Reforms:
Propose reforms and adjustments in corporate governance mechanisms that could have potentially prevented or
detected the financial mismanagement at Enron. Discuss specific measures to enhance transparency and
accountability in organizations.
IV. Role of External Auditors:
Assess the role of Enron's external auditors (Arthur Andersen) in the scandal. What improvements or changes
could be made to the auditing process to enhance the ability of external auditors to detect fraudulent activities
within companies?
V. Lessons for Corporate Governance:
Identify key lessons that other companies and regulatory bodies can learn from the Enron scandal. How can these
lessons contribute to improving corporate governance practices and financial oversight globally?
This case study explores the infamous Enron scandal, inviting an analysis of ethical considerations, stakeholder
impacts, corporate governance reforms, the role of auditors, and lessons for the broader corporate governance
landscape.
Solution for Case Study – Enron (2001)
I. Ethical Lapses and Corporate Governance:
Solution: The Enron scandal was primarily driven by ethical lapses within the leadership. Executives, including
Skilling and Fastow, prioritized personal gains over the company's well-being, leading to a severe failure in
Case Studies on Corporate Governance 6
 ethical standards. Corporate governance reforms should include stricter oversight of executive actions and a
commitment to ethical conduct.
II. Impact on Stakeholders:
Solution: The Enron scandal had a profound impact on stakeholders. Shareholders faced significant financial
losses, employees lost their jobs, and creditors suffered. To rebuild trust, restitution for affected stakeholders,
transparent communication, and ethical leadership are essential.
III. Corporate Governance Reforms:
Solution: Reforms in corporate governance mechanisms should include:
1. Strengthening the independence of the board of directors.
2. Implementing stringent internal controls and regular financial audits.
3. Enhancing transparency in financial reporting and requiring CEOs and CFOs to certify the accuracy of financial
statements.
IV. Role of External Auditors:
Solution: The role of Enron's external auditors, Arthur Andersen, was compromised. Reforms should include:
1. Regular rotation of audit firms to avoid conflicts of interest.
2. Strict enforcement of ethical conduct and independence among auditors.
3. Establishing a transparent process for reporting concerns about financial irregularities.
V. Lessons for Corporate Governance:
Solution: Key lessons from the Enron scandal include:
1. Establishing a culture of transparency and accountability.
2. Ensuring that executives and auditors prioritize the interests of shareholders and adhere to ethical standards.
3. Regularly reviewing and updating corporate governance practices to adapt to changing business environments.
Implementing these solutions will contribute to preventing financial misconduct, protecting stakeholders, and
fostering a culture of integrity within organizations.
CASE STUDY – 6
WORLDCOM SCANDAL (2002): UNRAVELING FINANCIAL DECEPTION
In the early 2000s, WorldCom, once a telecommunications giant and a symbol of corporate success, faced a severe
financial scandal that would eventually become one of the largest accounting frauds in history. This case study examines
the events surrounding the WorldCom scandal.
Background: WorldCom engaged in fraudulent financial reporting, inflating profits by capitalizing costs and hiding
expenses. CEO Bernard Ebbers and CFO Scott Sullivan orchestrated the accounting manipulations, leading investors
and the public to believe the company was more profitable than it actually was. When the fraud was uncovered,
WorldCom filed for bankruptcy in 2002.
Questions:
I. Ethical Lapses and Corporate Governance:
Were the actions of WorldCom's executives primarily driven by ethical lapses, or was the scandal indicative of a
broader failure in corporate governance? Justify your perspective, considering the roles of the company's
leadership and board of directors.
II. Impact on Stakeholders:
Analyze the impact of the WorldCom scandal on various stakeholders, including shareholders, employees, and
creditors. How did the revelation of financial fraud affect trust and relationships with these stakeholders?
III. Corporate Governance Reforms:

Case Studies on Corporate Governance 7

 Propose reforms and adjustments in corporate governance mechanisms that could have potentially prevented or
detected the financial mismanagement at WorldCom. Discuss specific measures to enhance transparency and
accountability in organizations.
IV. Role of External Auditors:
Assess the role of WorldCom's external auditors in the scandal. What improvements or changes could be made to
the auditing process to enhance the ability of external auditors to detect fraudulent activities within companies?
V. Lessons for Corporate Governance:
Identify key lessons that other companies and regulatory bodies can learn from the WorldCom scandal. How can
these lessons contribute to improving corporate governance practices and financial oversight globally?
This case study delves into the WorldCom scandal, inviting an analysis of ethical considerations, stakeholder
impacts, corporate governance reforms, the role of auditors, and lessons for the broader corporate governance
landscape.
Solution to case study on Enron Scam
I. Ethical Lapses and Corporate Governance:
Solution: The WorldCom scandal was driven by significant ethical lapses within the leadership. Executives,
including Ebbers and Sullivan, prioritized short-term financial gains over the company's long-term sustainability.
Corporate governance reforms should focus on reinforcing ethical conduct, establishing a robust internal control
environment, and ensuring the independence of the board of directors.
II. Impact on Stakeholders:
Solution: The WorldCom scandal had severe consequences for stakeholders. Shareholders faced substantial
financial losses, employees lost jobs, and creditors suffered. To rebuild trust, efforts should be made to provide
restitution for affected stakeholders, transparent communication, and a commitment to ethical leadership in the
post-scandal recovery.
III. Corporate Governance Reforms:
Solution: Reforms in corporate governance mechanisms should include:
1. Strengthening the independence of the board of directors.
2. Implementing stringent internal controls, including regular and rigorous financial audits.
3. Enhancing transparency in financial reporting, with a focus on accurate and timely disclosures.
IV. Role of External Auditors:
Solution: The role of WorldCom's external auditors was compromised. Reforms should include:
1. Regular rotation of audit firms to avoid conflicts of interest.
2. Stricter enforcement of ethical conduct and independence among auditors.
3. Establishing a more transparent process for reporting concerns about financial irregularities.
V. Lessons for Corporate Governance:
Solution: Key lessons from the WorldCom scandal include:
1. Establishing a strong ethical culture within organizations.
2. Ensuring that executives and auditors prioritize the interests of shareholders and adhere to ethical standards.
3. Regularly reviewing and updating corporate governance practices to adapt to changing business environments.
Implementing these solutions will contribute to preventing financial misconduct, protecting stakeholders, and
fostering a culture of integrity within organizations.

Case Studies on Corporate Governance 8