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Rakesh Soni Essay

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Updated: Jan 26th, 2020

Priorities before Soni

Rakesh Soni is a chief compliance officer (CCO) to the Indian information technology (IT) company appointed in July 2009. This company is managed by a board of six members assigned by the federal government as caretakers the same year. Soni was allocated the responsibility of controlling the corporate governance of Mahindra Satyam Limited. This was implemented to enable the company’s progress without increasing the workload from the preceding year 2008 (Pradipta Mukherjee).

As the chief compliance officer, Soni was to come up with a new outline on code of ethics and instill principles of corporate governance at Mahindra Satyam Limited, which was formerly recognized as Satyam Computer Services Limited. Soni was supposed to report his ideas to the vice chairman of Mahindra Satyam named Vineet Nayyar.

Soni also served as the company’s chief operating officer with the profit center. He was accountable for business verticals, which he reported to C. P. Gumani who was chief executive officer (CEO) at Mahindra Satyam Limited.

In a bid to carry out this responsibility effectively, he solicited assistance from Sucharita Palepu. Palepu was the head of talent management in Human Resources (HR) at Mahindra Satyam.

Managerial Issue before Soni

Soni was to ensure that there would be no additional violation, overt or covert of corporate governance standards. Mahindra and Mahindra Company had outlined these standards as follows; introduction of strong cooperate best practices, review of key processes, and implementation of suggestions from forensic accounting/investigating authorities.

Soni was responsible for ensuring that everyone worked with integrity, which was greatly backed by Mahindra’s reputation. However, information available to the independent directors was limited.

Soni had to make a decision on substitution of Satyam since it was tainted as an individual brand. It was important to give the brand a lower profile among the stakeholders even though it was the dominant source of value creation.

In fact, this brand recorded higher revenues, larger number of employees, and higher economies of scale than Tech-Mahindra. In addition, it was more recognized in the global technology industry than Tech-Mahindra. On the other hand, Tech-Mahindra was offering an opportunity to force entry into the market.

In addition, Soni faced the managerial issues of integration among people who were the motivating forces in the IT industry.

Signals Indicating that Independent Directors Missed at Satyam

As per the suggested code of conduct, the directors were to represent the interests of shareholders and consult them when making important decisions such as in acquisitions. However, the chairman of the board of directors (Raju) approved the purchase of 100% stake in Maytas Properties and 51% in Maytas Infrastructure (Maytas Infra) on an investment of $1.3 billion and $0.3 billion respectively.

These infrastructure companies were controlled by Raju’s sons. Maytas Properties established in 2005 was involved in the development of such urban space infrastructure as integrated townships and special economic zones. On the other hand, Maytas Infra was involved in building highways, metros and ports (Bartlett and Beamish 67).The directors were expected to demonstrate high standards of integrity, devotion, independence of thought, and judgment.

In this light, the described approval and purchase were out of context. The chairman and managing director of Mahindra and Mahindra Company made a commentary that, “it is not as though we did not have a plan to go in. It was not as though once we won the bid; we scratched our heads and said, “Okay”, what do we do next?”

When we took over the company, we had a road map of what to do from day one. We were like commandos hitting the ground with a battle plan. The key message was: the past is, by definition, gone, so let’s pick up the pieces, the good ones, and start running” (Taneja 44). This shows explicitly that due care was not considered.

Another code of ethics was that all directors had to dedicate adequate time, energy, and attention to ensure diligent performance of his/her duties inclusive of making all reasonable efforts to attend board or committee meetings. In the standing issues of the company against its accounts’ books, it was overstated leading to false and unfair view of the shareholders and the public in general.

The directors claimed to have no previous knowledge, which was a clear expression of neglecting responsibility. In summary, the directors were required to comply with every provision of this code. However, they had gone against this code in a precise and explicit manner.

Personal Idea on Role of Auditors

In my opinion, the roles of auditors are as indicated in the following list.

  1. Scrutinizing the financial statements and the announcements of a company in order to examine whether they are the true and fair representation of the business.
  2. Assessing internal financial controls and risk management system within the company.
  3. Scrutinizing and examining internal auditing operations.
  4. Endorsing external auditors’ appointments and replacements, and analyzing their work efficiency
  5. Fostering and instigating guidelines on the use of auditors for non-audit services (Leung, Barry and Robertson 43).

Works Cited

Bartlett, Christopher and Paul Beamish. Transnational management: text, cases, and readings in cross-border management. 6th ed. New York: McGraw-Hill/Irwin, 2011. Print.

Leung, Philomena, Barry J. Cooper and Peter Robertson. The role of internal audit in corporate governance & management. Melbourne: RMIT Publishing, 2003. Print.

Taneja, Nawal. Looking beyond the runway airlines innovating with best practices while facing realities. Burlington, VT: Ashgate Pub. Co., 20102009. Print.

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