The Satyam debacle
Less than two weeks into the year, and we are already immersed in the drama and debate around the massive fraud at Satyam. I found the Satyam news utterly dismaying - when it comes to the brand that the Indian IT industry has built over nearly three decades, this is a setback, a black eye. India’s software firms have after all, prided ourselves on our standards in corporate governance and disclosure.
All of us who run companies must really put ethics, corporate governance and running a transparent company at the forefront. If results are bad we should declare that, if profits are low we should declare that - and there is no such thing as too much data being open to the public. We should not be doing anything which imperils the trust the public and our stakeholders have in our companies.
I also interviewed with CNN-IBN on this.
Tags: Corporate governance, Satyam
January 13th, 2009 at 9:30 pm
Sir,
The only thing I could not understand is why should an entrepreneur like Raju, who created a world class organisation like Satyam butcher it with his own hands? Isn’t it a perennial cash cow? I can understand plain greed from run-off-the-mill kind of people, but this instance wherein the company is one of the top league and is in existence for over 20 years, I simply couldn’t reconcile myself with any logical reason.
January 13th, 2009 at 10:33 pm
Sir,
The fraud itself is disheartening, but what could be more so is our institutional response to it.
The ICAI seems unable to do anything to the audit firm in question (only going after the individual partners who signed the statement). Per Indian contract law and the way engagement letters are drafted by them - the audit firm will walk free. This when they were also auditing Global Trust Bank
I suspect that “home free” the also the way senior officers of the company are headed, based on media reports of how the case is developing.
I think we desperately need to strengthen our enforcement institutions and make them more credible - that will build up more assurance to global investors than any corporate governance exercise.
January 14th, 2009 at 12:02 am
Strong words, Mr. Nilekani. Does conscience even matter when you’ve been over ruling it for seven years. Mr. Raju’s talk about “a burden on his conscience” is sheer hypocrisy.
At the same time, the fraud is definitely not his fault only. PwC is equally responsible, as are other members on the Satyam board.
Infosys, meanwhile, continues to impress. Q3 profits are a morale boost in times of recession and the company deserves to be lauded for those efforts.
January 14th, 2009 at 12:12 am
Sir,
I absolutely agree with you. its important to bring in transparency, accountability, honesty in all walks of life. being in US, I have heard people here speak about India badly, the way corruption is going on in all walks of life. after Satyam fiasco, I felt ashamed as an Indian. as you said, it is absolutely true that one apple can’t spoil the basket, but the enormity of the scam, the ease with which the scam was perpetrated for over 7 years without anyone noticing it is really alarming. this clearly shows the weakness in our system, it is more than a ‘Black Eye’ as you said.
so the point here is not that there are many more companies like this, but the vulnerability of the system. again it goes beyond IT sector, it reflects our society, governance system. things have improved compared with 1990s but we still have a very long way to go. most of us are content with looking after themselves. we are not able to define where self interest ends and national interest begins.
I also heard you say lot of times, I quote your statement here “democracy in India gives opportunities and roles to people to be part of the change process without being specifically in politics. I want to contribute to the change process ,but not directly through joining politics”.
what you said is politically correct statement, but beg to disagree with you. we want to see you in decision making capacity not as a person playing a role from the background. because ultimately you will have to listen to the political powers and however dedicated you might be- the outcome completely depends on the political will. so people like you should join mainstream politics and try and make change directly. I read you say in your book that you are ‘unelectable’, well - it is not completely true, things will change but for things to change people with high integrity , pedigree should take the initiative and join politics.
January 14th, 2009 at 10:32 am
Dear Nandan,
As an avid reader and evangelist of good ideas, and hapless victim of the recent corporate sham of global magnitude that would make all the progressive thinkers in the Indian Industry towards better society, better governance—-based on not just ‘impersonal’ processes or bureaucratic systems, but based on collective social values of trust, integrity and honesty—-I would like to share my anguish and the gush of thoughts that criss-crossed my mind during the tumultuous period of the last 2 months.
I was one of the first few enthusiastic readers of the book ‘Imagining India’ when I received a copy of the book on 17th Nov’09 (mail-ordered it from Bangalore, much ahead of its proposed release by Nandan himself in Hyderabad, I don’t know whether the release in Hyderabad really happened or not subsequent to the tragedy in Mumbai few days before). The book is really a culmination of historical and ‘surgical’ perspective on why we—Indians and our businesses and systems—behave the way we do. At the same time, it gives us hope, opportunity and a ‘safety net of ideas’ to reform our thinking, systems and to focus on our priorities.
With few more chapters still to be read, the events of the last three weeks in my company jolted me out of meditative reflection I’ve been in while reading the book, to the reality of corporate sham in my own backyard. ‘White-collar terrorism’ (sorry for using the word, I could think anything better), I currently feel, is ‘terrorising’ not only the company’s 50,000+ employees, their families and extended employees, but the entire India Inc., and global investor base.
Having lived the greater part of my professional life (at the cost of my personal life at times, as most IT professionals work on near 24×7 cycle) in two of the top-tier Indian IT firms (albeit discounting the now disgraced one), I go nostalgic and recollect what the chairman of one of India’s most respected organizations for corporate ethics and governance, my ex-employer, had said during his six-monthly ‘planned communication’ to new recruits in 1995. I vividly remember those words:
“We will not do anything that rubs on the wrong-side of the law putting us on the front-pages of newspapers” (sorry, my wording may not be exact).
The “Core Values” in that company are not confined to mere nice-sounding words pasted on walls or printed on glossy brochures or annual reports. They are lived by every employee and the messages get percolated as ‘folk-tales’ in the company. I clearly remember the saying of Peter Drucker (highlighting the importance of individual’s integrity and trust vis-à-vis his/her business performance and personal productivity) printed on every resume-application to the company. Moreover, I will never forget the trauma I underwent when I had to fire one of my hard-working team members on the non-negotiable and uncompromising issue of Integrity when she submitted fake book-purchase bills for claiming IT exemption. Also I never forget the embarrassment I had when I purchased pre-paid taxi coupon at Bangalore Airport when my boss’s boss (who happened to be travelling on the same flight from Hyderabad to Bangalore) was heading towards auto-rickshaw stand. Believe me, since then, I never resorted to any expensive cab and instead hired auto-rickshaw whenever it is convenient and safe even on official trips (chose the best alternative as if I were spending my personal money). I proudly share these stories all the time to my colleagues even after leaving the company more than eight years ago. In a lighter vein, we even had an alter-name for our fond chairman as the ‘richest miser in the world’. ‘Live middle-class values’ is his message to employees.
It was another story that I had to leave that company due to my ‘bad’ boss. However, I continued to carry the same principles and evangelized the same via leadership lessons in my current company. Currently heart-breaking and mind-numbing for me is the fact that I, as trusted employee, have to witness ostracizing of my current big boss by the whole global business community for serious integrity violations of unimaginable proportions. While I took pride (with heavy heart) in protecting the values of my earlier company when I had to fire one of my hard-working team member for a ‘minor mischief’ (of saving couple of thousand rupees by the employee who is ill-informed of the company’s core values), I couldn’t dare imagine that we—as emotionally and financially terrorized employees—would’ve to fire our own boss now for the same violation of INTEGRITY.
Core-values do not have quantitative measures—they’re to be felt by the heart, seen through honest dialogue, exchanged between people, and integral to existing business and social systems. A 1000 rupee ‘minor mischief’ or 7000 crore ‘accounting fraud’—both are serious violations of integrity and trust.
While we know what needs to be done (as a knee-jerk reaction, in fire-fighting mode), we need to focus on the big picture as this malady is rooted deep in our society—Politicians-Government-Businesses—and what we witnessed is just an indication and therefore an opportunity to cleanse our systems.
I think the greater IDEA is to engineer ‘immeasurable HONESTY’ into ‘measurable and inhuman PROCESSES’. If the ‘human intent’ is skewed, however good the design or sophistication of technology in process implementation, all documented and certified processes just become rituals of compliance! Only humans can judge humans. That’s exactly what we did now.
January 15th, 2009 at 12:54 pm
Hi Mr. Nandan,
Over the last 7 years, you as a competitor to Satyam, did anyway think that the numbers were fudged at satyam? I mean, knowing the underlying business dynamics, during your competitor analysis, some alarm bells might have cropped up in the mind of the infy’s management. I am not saying this is any demeaning way of you or the infy management, both of whom I admire. But could the industry or nasscom have played a much proactive role in this satyam saga? At the end of the day, we are talking about one fo the top 3 in India and not some third-tier company.
January 17th, 2009 at 5:30 am
while the confession of Raju itself is quite questionable! this smells of siphoning money than cooking the books! it looks like a forward fraud and blamed on inflating the numbers, just like other frauds in the US.