Hyderabad / Bangalore: Raising fresh doubts about the credibility of Satyam Computer Services Ltd’s promoter-managers, Harvard professor G. Krishna Palepu now says he actually resigned as a director after being stunned by a disclosure that chairman B. Ramalinga Raju and his family’s stake may have been diluted by financial institutions who had lent them money.
New revelations: Harvard Business School professor Krishna Palepu. India Today Images
The promoter family’s stake, originally estimated at relatively low 8.6%, is a key component of a major self-dealing and corporate governance scandal that has enveloped Satyam after chairman Raju personally led an effort to use $1.6 billion (Rs7,760 crore today) of the computer company’s money to buy out two infrastructure companies that were promoted by his sons.
At least four so-called independent directors have now resigned amid a slew of unanswered questions; Satyam’s repeated stonewalling about key gaps in its statements; a sharp plunge in Satyam’s shares since 16 December; and a serious government probe that has cast a dark shadow over corporate governance practices and shareholder rights in India.
“The timing of my resignation was prompted by the revelation this past weekend that the promoters of Satyam pledged their shares with financial institutions, and that they were under margin call pressure. This was complete news to me,” Palepu wrote in an email response to a Mint questionnaire.
Satyam disclosed that the promoters had informed the company on 27 December of the possibility of their stake being reduced as a result of institutional lenders liquidating the shares. The company and the promoters have since refused to elaborate or address stories that the stake may have been halved.
Palepu’s statement is a dramatic change in stance by the Harvard Business School professor.
Also See Satyam’s Director Compensation (Graphic)
In an earlier statement, Palepu claimed that he had been working with the management of Satyam to craft a new agenda for the company to deal with the challenges it faces and his physical presence was required over the coming weeks and months to effectively implement this agenda.
“Due to my teaching commitments, this is unfortunately not possible, so I have regretfully resigned,” he had said, a claim similar to another academic, M. Ramamohan Rao, dean of the Indian School of Business in Hyderabad, who too claimed a busy schedule for resigning.
Both the other directors who resigned, well-regarded venture capitalist Vinod Dham and Mangalam Srinivasan, said they were resigning over the botched acquisition deal that Satyam said was signed off by all nine directors unanimously.
Satyam aborted the deal within 12 hours of unveiling it because institutional shareholders mounted a revolt and its US-listed shares lost at least half their value.