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Topic : Corporate Governance
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Satyam fiasco exposed corporate governance standards in India?

Created by : Rajesh Kona, Sales/BD Manager, iGate Global  | 01 07 2009 09:10:15 +0000
Industry : IT ServicesFunctional Area : India(Markets)
Keywords : corporates satyam corporate governance maytas raju satyam computer services b. ramalinga raju
Activity:  4840 views;  last activity : 07 06 2010 20:18:09 +0000
Raju’s letter to the company board revealed a fraud of unprecedented proportions. The perception of investors about disclosure and corporate governance standards is surely going to get affected. Will you now be able to take result and financial statement declarations of any companies at face value? What do you think?
  
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Actually I would like to respond to this question - a 'yes' and a 'no'. No doubt (Corporate Governance) CG has failed! But that is only the effect!  What is the root cause for that failure?  Let us look at the turn of events after the fateful Jan. 7th.

D CA swung into action after a couple of days of media outcry and appointed a three member Board for Satyam.

The state machinery was tentative, initially, in arresting the CEO who admitted, voluntorily and to the surprise of powers that be, to the financial crimes committed by him.

Then there was a debate who should investigate the crime, whether state or central investigative machinery! Common sense should dictate that, when the effects of the crimes greviously affected cross-border states, it should become the subject of central investigating agency, but no, political will overrules common sense for some mysterious reasons. what are the governance standards for the governments? Corporates are operating within the framwork of such government governance (GG)

Then a central minister, according to the media, has ruled that Satyam fraud perpetrators can be convicted further on some more provisions of criminal law, if the government WANTS (mark these words in bold letters). When it comes to trying the criminals, on fresh evidence under addtional grounds, should it not happen automatically and the law should take its own course?  Why it should be left to govt.s' likes or dislike? How can a govt., an artifical person, can have wants, likes or dislikes? If, as per our constitution, "no one is above law", why differentiate?

After all, the legislative institution, in a democracy, consist of executive machinery and non-executive and independent legislative parties/members. Drawing parellel to a corporate Board which also consist of executive machinery and independent/ non-executive committee of directors, can we ask what the independent legislators are doing when the government's executive machinery is twisting the arms of the very legal provisions passed by the very same legislators?

In fact, corporate board, unlike the legislative institution, is not a democratic set up entirely! Hence, it is all the more reason for the goverment machinery to follow GG as model, so that CG can be tone up properly. 

To sum up, the ligislative set up should have GG standards first. This will tone up legal set up, law enforcement set up and the regulatory set up. Once this happens, the CG will greatly be forced to function effectively! 

This should be the norms of governance for all countries not only for India so that whether USA or India or China/ Russia can clear cobwebs in their coroprate entities, instead of blaming each other. Global Investor confidence will return only then!
By pranatharthi haran, Consultant, coramandel Infrastructure P Ltd  01 30 2009 18:54:10 +0000
 
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Satyam Story is one off and this cud have happened in any part of the world not only India .if Enron/Lehman  cud crash ...why not Satyam .If GM and CITI  cud run for cover ...why not Satyam .Problem does not lie in what Raju did or didnt do ...lets look at what prompted him to do so ...Shareholders greed ...the fact that you cant go back to ur people and be honest abt whats happening .If not now bare facts  would have toppled satuam few years back.Falling margins ,unethical business practices seem to be order of the day .If everything would have worked out finally raju was a great crisis manager ...Stocks failed ..realty got hit ...and almost everything else worked against satyam and raju ...story was to be out someday ...

Lets analyze role of core team of professionals running the show i cant believe everyone else was sleeping ..they had no clue as to what's happening .We all know every sneeze in board room is reported , analyzed and grapevined in the company much more than real killer business ideas or wins .

 You see people enjoy the benefits and when it comes to governance , fall out of any malprctices ..catch the promoter ..he has done it all wrong .Common.. wake up guys a 7K crore scandal....everyone is involved ...Systems also have to be blamed ..not only people What our regulators were doing , PWC ...the mecca of Audiotrs ,Management gurus ...wow ..this is shameful for regulatory mechanisms and Order/systems of the day not only Satyam, PWC or Raju or someone else .Smart people will always try  play their designs ....were we sleeping (full spirited)  as an economy.

Sanjay

 
By Sanjay , Owner, KPO  01 08 2009 18:22:01 +0000
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Satyam saga is not just horrific in proportion but more mystifying then any of the financial thriller. I simply fail to comprehend as to how a company with international presence and professioanals of high standard can decieve themselves that they are not aware of it. I m also a Chartered Accountant....I have just seen the live press conference by new CEO....he is at pains to answer any of the pertinent question...How can we beleive that somehing as solid as cash an bank balances of the company can be fudged and nobody in accounts department or finnance department were simply unaware of it for such a log time?  Raju says neither he nor his family had made any money becoz of this fraud then what the hell was happening? what the internal auditor, statutory audiotor audit commmittee etc...were doing? it was not some clever crafting in the accounts...it is as simple as ascertaining and reconciling balance from the bank statements...a very basic audit tool? something is terribly wrong....no we have yet not heard the last word on Satyam fraud...there are many dimensions that yet to be uncovered....the simple suspicion in the minds of foreign investors would be if this can happen when the foreign based auditor can ba as gullible and as vulerable as this what about Indian auditors? Let us reconcile to the fact that our credibility is at stake...how much damage it has done or will do is a matter of speculation...but people are hearing warning signal loud n clear... 
By HASMUKH GANDHI, FILM AND TV PRODUCER, PROFESSIONAL  | 01 26 2009 05:47:38 +0000
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Don't call him Ramlinga Raju actually he is Fraudlinga Raju ....I am agree with all comments..
By Abhishek Tiwari, Team Lead | Web Servers | Network  | 01 24 2009 09:40:59 +0000
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Yes definitely now investors will stay away from IT sector.  Today, the already market battered investor is skeptical about companies’ stated growth figures. People planning to invest has lost faith in balance sheets & they will look twice over from now on. The confidence can only return if authorities take firm action in the case. It’s hit India’s credibility in a big way.
By Gaurav Taneja, Sales/BD Manager, Interra Information Technologies  | 01 09 2009 08:05:30 +0000
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(A)Satyam's Raju caused more damage to the image, credibility, accountability, trust of India, Indian Corporate Inc., Indian Outsourcing Industry, Software Industry in the eyes of the shareholders/stakeholders/public. The likes of which nobody had ever seen and probably(hopefully) would never see.
The harm cannot be quantified, extent of rot, never imagined, issues which it has raised and the levels at which it has raised are of garguantan proportions.

Llet's imagine a hypothetical scenario that the company fails - its effect on realty industry in Hyderabad ( where it's based), a seemingly unconnected industry one wud say.

The realty industry can say goodbye to any hopes of reversal in its fortunes for the next 3 months more than what had been prognosed earlier.  And, I've not even started talking about IT services industry.


By Vinod Yadav, Marketing Manager, L & T  | 01 08 2009 10:07:55 +0000
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The Indian technology industry was a very important driver for the country's stock market for nearly a decade. I am pretty sure that Satyam's fraud is expected to lead a severe blow to the entire industry with investors being more cautious going ahead & what a shame recently in September 2008, Satyam Computer Services had bagged the Golden Peacock Global Award for excellence in corporate governance....
By Rajesh Kona, Sales/BD Manager, iGate Global  | 01 07 2009 09:10:15 +0000
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Mr.Sanjay i completely agree with you.Just because it was an indian company people are saying that its not safe to work with indian companies but what happens to those people when foreign companies are involved in same or even bigger frauds than satyam.We should not blame or generalize the whole industry or country on the base of fraud by a single company or i should say it was not the company but the fraud by a few people of the top management of that company.

Our corporate governance standards are not weak and it was a one-off incident.
By Ramdas Pawar, Sales/BD Manager, Flex  | 04 15 2009 12:08:34 +0000
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Sanjay i completely agree with you,first of all we should not degrade the entire software industry because of a fraud of a single company,secondly there are many companies in the past who were involved in bigger frauds than satyam and that too foreign multinationals so why just generalize the entire in dian IT industry...moreover we cannot say that there is only one individual who was involved in the scam of 7k crore rs.,as you rightly said that each and every thing in an organisation is scanned and analyzed so how can a single guy amke a fool of all the people associated with the company.

so we cannot say that the governance standards are not appropriate....the people who are supposed to perform the standards are themselves corrupt and greedy... what do you say?
By Radhakrishna Marar, Business Analyst, Oracle  | 03 30 2009 06:15:28 +0000
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If we simply try to bail out Sathyam so that 52000 employees and customers do not suffer, then India's image would take a beating. 

Following alternatives may appear drastic and even border on irresponsible.. But I have a feeling that India will enhance its image drastically and more investment will come into India..

A.  Allow Sathyam to go bankrupt.  All shareholders of Sathyam (even if limited liability clause applies) are liable.  Let them atleast suffer financially

B.  The 52K employee pool of Sathyam can give rise to over 200 smaller IT companies.  They Government anyway wants to lend.  Let them lend to these companies.  Let the customers change over.  I am aware that not all employees can turn entrepreneurs.  200 of these certainly can.  These 200 persons know whom to appoint amongst the balance 51k plus, for what job.  They get existing projects to start with.  Let them grow gradully.

C.  All International companies Sathyam has taken over can be taken over by other companies like Infosis/Wipro/TCS etc.  To these companies and employees, it does not make much difference and even if it does, it is for the better. 

D.  Detailed investigation should be conducted on Rajus' conduct.  The two family owned companies should also be investigated.  These two companies should be taken over by government or sold after tranparent valuation to other companies.  The money should go where it belongs

E.  Auditors should be made accountable.  Remember Union Carbide after Bhopal Gas Disaster.  PWC can be sued for loss of India's image too!!

F.  One advocate in a page 9 article in Deccan Herald claimed that Rajus have a trust which is doing yeoman service to society.  The trust should be investigated.  He also claimed that all Company Law filings were done as per law.  That means that Rajus have received legal advice to perform an illegal act.  That is abetment.  That particular lawyer's antecedents to be probed and if he has abetted the crime, he should be held accountable also. 

G  Andhra Pradesh Government need not replace Maitas Constructions on infrastructure projects.  But they can change the company by making it publicly accountable.  All its activities from now on should be publicised.  The Government owes it to people of the country. 

H  Probe into hidden assets of Rajus should be conducted.

I  From the day Sathyam was born, we should build Sathyam's profile: corporate, financial, taxation, employee liability etc.  We should then arrive at historical data on profits, margins etc.  We should then rebuild debtor/creditor systems.  Only then we should take actions both proactive and reactive. 

 
By SR Sham Sunder, CEO/MD/Director Technoaid  | 01 12 2009 12:40:41 +0000
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Rajesh, i agree that what has happened is bad & the Satyam episode should be a good warning signal for all managements but it is important to remember that one Satyam does not make the entire Indian software industry. I believe it is an isolated case. I want foreign investors to realize that there are many honest managements and good companies in this country. While what has happened at Satyam is totally regrettable, I believe that it does not represent India. It just represents one individual and one company & should end there.......
By Radhakrishna Marar, Business Analyst, Oracle  | 01 07 2009 11:25:45 +0000
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Raju’s letter to the company board revealed a fraud of unprecedented proportions. The perception of investors about disclosure and corporate governance standards is surely going to get affected. Will you now be able to take result and financial...
more...