Satyam Scandal - India's Enron

[omairhr]

@Punjabee_in_USA

Will the Satyam debacle really harm Indian business? - Columns - livemint.com

*The extent and audacity of what appears to have transpired at Satyam is indeed unparalleled in Indian corporate history. However, we believe that Satyam is by no means the norm from which standards of corporate governance can be generalized. The sizeable majority of Indian companies follow the highest international standards of governance and compliance in multiple legal and capital market jurisdictions. Any casual generalization of the Satyam situation would be both unfair and damaging to such well-managed companies. *

Talking about Corporate Governance, lets look at the board of directors of the company.

The ones who quit:

Dr. Mangalam Srinivasan

Mangalam was involved in working with US Government Departments, US National Academy of Sciences and US National Science Foundation and the UN. She released a major publication on Technology Assessment and Development.

Vinod K. Dham

He has co-authored numerous technical papers and patents. Dham is also on the Boards of Newpath Ventures LLC, Hello Soft Inc., Sasken Communication Technologies Ltd., Nevis Networks Inc., Telsima Corporation, Insilica Inc., and Montalvo Systems.

Dr. Krishna G. Palepu

He teaches Finance, Control, and Strategy in Harvard’s MBA and Executive Programs. His research focuses on analyzing firms’ business strategies, and the process through which the effectiveness of these strategies is communicated to investors.

Dr. Mendu Rammohan Rao

Prof. M Rammohan Rao is the Dean of Indian School of Business (ISB).

The ones who are still there:

B. Ramalinga Raju
Ramalinga Raju, also known as Raju, is Satyam’s founder and chairman.

B. Rama Raju

Rama Raju, also known as Ramu, is Satyam’s co-founder and managing director.

Ram Mynampati

Ram Mynampati joined Satyam as executive vice president in 1999 and became executive vice president and chief operating officer in November 2000.

T. R. Prasad

T. R. Prasad holds a master’s degree in Physics (Electronics) from Banaras Hindu University. He is a lifetime fellow of the Institute of Engineers (FIE). He took over as Cabinet Secretary, Government of India, on 01.11.2000 and held this post for a two-year tenure after which he joined the 12th Finance Commission as a member.

Prof. V. S. Raju

He is the former Director of the Indian Institute of Technology, Delhi; and was a professor and Dean at the Indian Institute of Technology, Madras.

All in the Family
Satyam’s founder and chairman, Ramalinga Raju and B. Rama Raju, the co-founder are brothers and still on the board. Chairman Ramalinga Raju’s family holds 8.61 per cent through SRSR Holdings.

=========================

It is interesting that the ‘ones who resigned’ were academics and i do not think that they had much time to oversee the direction of the company. They were added to the board for the sake of having ‘celebrity’ non-executive directors! The others were mostly family members.

The auditors of the company were PriceWaterhouseCoopers, a Big4 firm. If what Mr Raju said in his letter (Ramalinga Raju?s letter to the Board of Directors and SEBI | Share market guide, Learn stocks, IPO, bonds, money market and mutual funds) has any truth, the auditors should have discovered the scam years earlier!

Time and again we’ve had warnings that having ‘celebrity’ directors as ‘non-executive’ directors and family members on board is a ‘red flag’ for investors and time and again we have failed to recognise those red flags.

[omairhr]

Re: Satyam Scandal - India's Enron

And for all the 'patriotic' Pakistanis out there... we do not have financial scams like that in Pakistan in IT sector because we do not have billion dollar firms here!

[omairhr]

Re: Satyam Scandal - India’s Enron

There were ‘red flags’ being raised about Satyam for a long time now.

Cheques and balances by Sucheta Dalal - Indian Express

This is from 1999:

“Frankly, were I shareholder of Satyam I would worry about its propensity to pay so much more when it could have paid far less. It is difficult to say what should have been the right price for an Rs 1.3 crore turnover outfit with 20 people when the savviest investors around the world are buying into internet companies at incredible valuations with no profits in sight.”

[firenze]

@omairhr

And for all the 'patriotic' Pakistanis out there... we do not have financial scams like that in Pakistan in IT sector because we do not have billion dollar firms here!

Satyam never was a billion $ firm !

[Punjabee_in_USA]

@Faisal

Punjabee… I know there is a tendency to be overly defensive about your country (true for Pakistanis as well as Indians), and in the process give up honesty in quoting articles to just reenforce your own views; good discussions flow when all participants are willing to have an intelligent and balanced conversation. Its interesting that you only quoted that one paragraph, and stopped. While the article you quoted is but just some individual opinions and the real story will play out in weeks and months to come, the following paragraphs from the same article are very relevant because they “balance” the tone of the sole paragraph you quited.

Here it goes

===

**However, it would also be naïve to believe that Satyam is the only Indian public company whose accounting or governance integrity has been compromised. **In fact, as far back as 1999-2000, the Kumar Mangalam Birla Committee on Corporate Governance had said, “There are some Indian companies which have voluntarily established high standards of corporate governance, but there are many more whose practices are a matter of concern.” As the global economic downturn bites further, we should not be shocked if other similar “bad apples” are exposed.

We feel it would be irresponsible to trivialize the broader implications of Satyam for India’s IT/BPO sector. The sector is already feeling the impact of recession in developed economies as well as concerns around the likely stance of the new US administration towards offshoring.

The Satyam scandal has emerged at a time when several overseas clients have been evaluating near-shore alternatives or other offshore destinations than India, mainly driven by political and security concerns, hyperinflation in Indian technical salaries and soaring real estate prices. The Satyam debacle may accelerate the pursuit of alternatives.

Trust is a vital factor when international clients pick offshore providers, especially since such providers have significant access to sensitive data, proprietary systems and complex processes. Recent discussions with our international clients clearly indicate that the Satyam experience has shaken that trust. Overseas clients and investors will demand much higher standards of transparency and due diligence, especially during the current climate of financial crisis. Well-governed companies with established disclosure norms and robust accounting practices will be clearly favoured. Weaker and smaller players will likely suffer as clients and investors seek out more stable and credible partners.

===

The last paragraph above is what I was referring to in my earlier post. There will be heightened sensitivity and scrutiny. Its normal. Its expected. Its reasonable.

I am glad that you read the entire article

The point that I wanted to make was that one cannot use Satyam as a yardstick to judge Indian corporates, which is cemented by the text that I quoted.

You are looking at the same issue from a different prism and saying that Satyam is not the only one. And I agree with that. There might be a few more bad apples. And clients will be rightfully more cautious when dealing with Indian BPO/IT companies.

[ravage]

Re: Satyam Scandal - India's Enron

hopefully this will discourage western companies from using indian services sector.

[omairhr]

@firenze

Satyam never was a billion $ firm !

Yeah, it was not. It was a $2bn firm

SAY: SATYAM COMPUTER SERVICES LTD Balance Sheet

Even if half of the assets were ‘fictitious’ that still makes it a billion dollar firm. Why do you think that this scandal was reported as a breaking news in all top financial news sources?

[omairhr]

@ravage

hopefully this will discourage western companies from using indian services sector.

This and some of the previous posts represent a typical Pakistani thinking. We're happy about something going wrong in 'enemy' countries. Never try and learn lessons from such incidents.

[Punjabee_in_USA]

@ravage

hopefully this will discourage western companies from using indian services sector.

Buri nazar waale tera moonh kaala

You can keep daydreaming, dude. Pakistan is in the mess that it is in, because instead of fixing its internal affairs they have been more interested in wishing ill (and actively trying to bring about ill) for India.

[simplyme]

@ravage

hopefully this will discourage western companies from using indian services sector.

The sad part is that there is no alternative. Western companies are not doing a favour by using the Indian services sector.

[AliBaig]

Re: Satyam Scandal - India's Enron

all in all.. the employees got screwed in the mess.... other companies denied accepting their resumes also...