'More satyams will continue to happen'

As an IT industry insider, i felt, like many of us, a personal sense of hurt by the Satyam episode. As an idealist, I believed that it was time for all well-meaning individuals to stand up and be counted in order to salvage the country’s corporate image. Which is why I had initially expressed my desire, on national TV, to take over as CFO of Satyam. Subsequently, wiser counsel prevailed after taking a closer look at the prevailing ground realities. Let me explain.

To my mind, the Satyam fiasco throws up a very pertinent question—do we have the political will to get to the bottom of the matter quickly without obfuscating the real issues at hand? Let us look at the facts as they are emerging. First, for a financial fraud of this magnitude, should the local state CID be the appropriate agency for investigation? It is almost shocking that the most competent investigative arms of the government like SEBI, SFIO and ED were not being allowed to even question Ramalinga Raju for weeks. It finally took writ petitions in the Supreme Court to accomplish what is an elementary investigative procedure. The CID doesn’t have the competency to crack open the case given the immensely complex nature of the crime with money laundering and hawala trails, land deals, benami accounts, insider trading, fictitious employee creation, round tipping through tax havens, etc. Meanwhile, precious time is being wasted in the process which will only give Raju an opportunity to cover his tracks. It’s clearly a case of blatant political patronage.

Secondly, the Board of Directors seems to have been cleverly filled with respected and honest people but with little or no managerial experience. Three key positions have been entrusted to people who have been heads of industry associations/professional bodies in the past. Their key skill is thus one of placating all sides in arriving at a “consensus” and not in driving major organisational changes. Deepak Parekh, the only business leader with impeccable credentials to sort out the mess, has not even been elected the Chairman of the Board! Remember how he sorted out the UTI tangle as head of the Deepak Parekh committee? This was only because the then government allowed him to function freely as a professional.

Then, allowing Ram Mynapati to leave the country within days of the scandal breaking out, on the pretext of a normal business visit to the US, speaks volumes of the true intent of the local police. Contrast this with the clarity of intent and purpose demonstrated by all relevant law enforcement agencies in the US during the Enron, Tyco, WorldCom and other scandals to speedily mete out exemplary standards of justice to the high and mighty involved in those scams.

Given the lack of political resolve to clean up the system, it appears to me that more Satyams in the corporate world will continue to happen. And many more small shareholders will lose their entire savings in similar episodes of governance failures of listed entities.

(The author is former Group CFO of Polaris Software and a Sloan Fellow from the London Business School)