Satyam, Asatyam

The Satyam scam comes at a time when the whole world is trying every trick in economic policy by announcing stimulus packages to stimulate the global economy.
Scandals and scams are not new to Indian equity markets the biggest of them was unleashed by Harshad Mehta in the early 1990s followed by Ketan Parekh and IPO scams. However, this incident not only put credibility of Satyam at stake but also raised
questions on corporate governance in India.

Sadly, this scandal may rub off on India Inc’s image as a whole.That’s bad news, given the double whammy of the global economic mayhem and Mumbai terror attacks. That can have a devastating impact on India’s future. India Inc needs to search its soul. If business-friendliness is to be projected domestically and overseas, corporate governance must top India Inc’s list of priorities. It’s a matter of keeping the faith of the larger community.

Enron was once billed America’s most innovative company. Then a massive accounting fraud, exposed in 2001, blew up on the US energy giant. In 2009, the script has been revisited in India.

Caught sleeping on their jobs are the agencies that oversee auditors, directors, company boards and stock exchanges in both countries. Much more than the fate of one company and its investors is at stake here, the scandal could taint the entire edifice of outsourcing.The tougher job is for our regulators - to ensure that capitalism in India functions within a system that does not permit a repeat of such longrunning abuse. Regulators in India and the United States, where Satyam’s ADRs are listed, need first to identify the gaps that led to the perpetration of such a gigantic fraud for so long and put in place systems and procedures to prevent their recurrence. A start could be made with changes in audit procedures and in the role and the responsibility of auditors.
The Satyam affair has exposed the gullibility of many players in the Indian corporate system - the regulators, shareholders, and the media. Price Waterhouse, seems to have missed out gaping holes in the balance sheet.

India’s strength in recent years has been its ability to produce great companies; and allowing that reputation to fall by the wayside is not in anyone’s interest.The time has come to ensure that corporate governance - the protection of minority shareholders, the empowerment of the common investor, the simple encouragement of the asking of questions, be placed at the centre of the agenda.

Satyam case puts reputation of entire business community at stake and the capacity of policy makers to punish the guilty.

Whether or not the Satyam case is an isolated one, as some business leaders think, is beside the point. At stake is the reputation of the entire business community in the eyes of the global and domestic investor. Equally at stake is the capacity of the policy makers to punish the guilty.

Over the years, India has created enough laws to unearth and book white collar crime of various hues. But history shows a poor record of the perpetrators being given their just desserts as cases drag on for years till they fade from public memory, leaving a permanent scar on the country’s reputation for governance.

- Editor