Hyderabad: AUK-based organization that bestowed Satyam Computer Services Ltd its highest honour—the 2008 Golden Peacock Global Award for Excellence in corporate governance—in September, plans to reconsider the decision after serious questions over lack of governance at India’s fourth largest technology outsourcing company.
Losing ‘effectiveness’: Satyam’s chairman B. Ramalinga Raju. Hemant Mishra / Mint
If its board concludes the award was undeserving, given recent questions about Satyam management’s attempts to use company money to buy two firms owned by the family of Satyam chairman B. Ramalinga Raju, the UK-based World Council for Corporate Governance says it may ask Satyam to stop using the award in its branding and publicity.
“What has come out in this case, as indeed in several high profile cases of malfeasance reported recently, is perhaps the ineffectiveness of the board despite its being constituted by men of such eminence,” said Manoj K. Raut, director general of the India office of Golden Peacock Award Secretariat. “The board and the jury will be meeting shortly to consider what further steps can be taken to rectify the situation and prevent recurrence.”
If the board, which is scheduled to meet in two weeks, concludes that its decision to give the award to Satyam was a mistake, the company would be asked to stop using the Golden Peacock logo or refer to the award for any purpose, Raut told Mint.
The Council has given Satyam a similar award, the Golden Peacock national award for excellence in corporate governance, in 2002 as well.
As per Council rules, the award logo and references can be used by a recipient for up to three years in branding and publicity.
A public review by the Council is another humiliating turn of events for Satyam and Raju, who, as recently as Wednesday, touted the Golden Peacock award in a letter to Satyam employees as proof of the “effectiveness” of Satyam’s corporate governance practices.
Satyam’s management has been caught under a governance spotlight after the management led by Raju got unanimous board approval to spend $1.6 billion (Rs7,792 crore today) of Satyam’s money to “diversify” by acquiring two infrastructure companies—Maytas Infra Ltd and Maytas Properties Ltd, both promoted by Raju’s sons.
An investor revolt forced Satyam to abandon the 16 December deals within 12 hours and amid continued questions about valuation, which Satyam management has stonewalled, and other governance issues, four directors, including highly regarded independent board members, have now resigned from Satyam’s board.
At the heart of the continued controversy is how a large related-party transaction into unrelated and troubled business areas, such as real estate, was pushed through by a management that later disclosed that its already small, 8.6% stake in Satyam had fallen even more as lenders who were pledged the promoters shares for loans started selling them in the open market.