Satyam-Maytas deal fiasco

Satyam means the truth. And Satyam Computers has defied the very name that it stands for. The way the Board of Directors and the promoters have tried to siphon off funds under the pretext of providing capex for the other two group companies – Maytas Infra and Maytas Properties has left the foreign fund managers completely stumped. There is a mood of complete distrust about India Inc and the general perception formed now is that all Indian companies openly flout rules of corporate governance and thus cannot be trusted. This is what Satyam has done – shroud the entire India Inc is a blanket of asatyam!



The first question which comes to mind is – how did the independent directors on the Board allow this to happen in the first place? The Board of Directors should first be made more accountable for this. Looking at the Rs.6,000 crore, which was lying in the balance sheet of Satyam, they probably salivated, thinking how it could earn them more, by merely lending it to another two group companies. But didn’t they think that they as Board of Directors were doing something so wrong? Apart from the core promoters, there are eminent names like Vinod Dham – father of Pentium; Professor Krishna G Palepu who is also on the Boards of Dr. Reddy's Laboratories Limited, Exeter Corporation, USA and Harvard Business School Publishing Co., USA; Prof. M Rammohan Rao who is the Dean of Indian School of Business (ISB); T. R. Prasad who apart from being a Cabinet Secretary has also been the Defence Secretary of the Government of India; Secretary, Industrial Policy and Promotion, Ministry of Industry; Chairman, Foreign Investment Promotion Board (FIPB); Secretary, Heavy Industry, and Chairman, Maruti Udyog Limited. And there is also Prof. V. S. Raju - former Director of the Indian Institute of Technology, Delhi; and was a professor and Dean at the Indian Institute of Technology, Madras and right now he is the chairman of the Naval Research Board, Defense Research and Development Organization, Government of India. Were they present in the Board meeting of Satyam having decided on this?



So what exactly is the credibility of these people if they could not see what the core promoters of Satyam were doing? What is their responsibility? Are they mere ornaments on the Board? And someone like Vinod Dham? Could he have ever dreamt of doing something in his company in the USA? Or is it that India mein kuch bhi chalta hai?



We talk of corporate governance but obviously it exists only on the papers of the balance sheet. Sterlite Industries too tried to take the investors for a ride. So when two big companies like Sterlite and Satyam have thrown corporate governance to the winds, what can one say about the others? Yes, at the same time, it is companies like these which will now spoil the names for the others who actually do practice corporate governance, It’s the rotten apple which spoils the whole basket.



And what was Satyam thinking? Rs.6,000 crore for infra and realty companies? Why was it forcing the shareholders of Satyam to get into infra sector against their will and judgement? If the shareholders wanted they would have invested themselves but what manipulate them? Also another question which comes to mind is – what is the need for Rs.8,000 crore for two infra companies, that too of the size of Maytas Infra and Maytas Properties? Even when we put together more credible and proven companies like Sobha Developers, Parsvnath, Puravankara, Omaxe, their present value do not add to Rs.8,000 crore. So how did Maytas group valued so much ? Greed? Avarice? These are the most obvious answers which come to mind. The

Rs 6,000 crore in the balance sheet was like a bone for the dog, enticing them to do something and get their teeth into it.



What also comes forth in this entire drama is the vigilance of the shareholders. They are the only ones who have played their role well, being the watchdog which was actually the job of the independent directors. This also goes on to show how shareholders can actually bring about the change, how they can, with their will and vigilance force companies to follow corporate governance. Just as we Indians need to be more vigilant about our security as the politicians have failed, we also need to take care of our money because the promoters and independent directors of companies are no longer trustworthy.



To think that Satyam could do this, that too at a time when there is a global financial crisis and even established companies are treading with utmost care to keep the faith intact; it is shocking!


India Inc will face the ire for some time but will manage to win over if they show they are serious about corporate governance but for Satyam – this blow to the image is irreparable as trust once broken can never ever be glued back together without the cracks showing.