New Delhi: Referring to the Satyam fiasco, Madhav Mehra, president of UK based World Council for Corporate Governance, addressing a press conference in New Delhi said, “Satyam fraud can be the greatest threat to India’s corporate reputation unless handled proficiently. We must recognize it is a systemic failure and not of an individual. Mr Raju is certainly not a chartered accountant and was incapable of hiding Rs7000 crore from company’s balance sheets for 10 years on his own or dupe such an eminently qualified board to believe that their profit margin was just 3% compared to 20% for its competitors.”
PricewaterhouseCoopers (PwC), an advisory and consulting firm whose sister company audited the accounts of Hyderabad-based Satyam Computer Services, has a chequered past with Indian tax authorities. Mehra said, “The auditors of Satyam, were most eminent, but their eminence also stood out from the fact they were named in previous scams at Yukos, Tyco and Bernie Madoff Ponzie scheme.”
Clearly, the biggest sufferers in this case will be employees, shareholders and investors. But its repercussions on the market cannot be underestimated. Citing the example of UK prime minister, Gordon Brown extending help to save jobs as a consequence of credit crisis, Mehra said, “In this season of governments bailing out companies, the first thing the government must do is to use its inherent powers to take over the company to ensure its continuity as an ongoing concern, constitute fresh management and end the anxiety of investors, employees and shareholders.”
He further said that under corporate governance laws we need to ensure no listed company has the chairman and CEO rolled into one. Each company must have a properly well-defined process of recruitment of independent directors and should not bank on their name but evidence of independent mind.
Emphasizing the need for good corporate governance, Mehra said, “While some companies lost almost 25% due to Satyam fall out, a number of companies with good governance like Tatas , Wipro , Infosys either gained or suffered marginal loss.”