New Delhi: Amid lingering, unanswered questions about corporate governance that have continued to drive the shares of Satyam Computer Services Ltd to a five-year low since a botched acquisition attempt on 16 December, some students and alumni of the Indian School of Business (ISB) are hoping for more clarity from their dean M. Rammohan Rao on his own role as an independent director on Satyam’s board.
“I don’t think he needs to step down because he is a dean for his academic achievement so far, but it would be good if he came out with his stand on the deal,” said ISB alumnus Aarthi Srinath, who works in the technology sector out of Chennai. “He needs to take it one step further for students and alumni, (and explain) what really happened in boardroom.”
Role under scanner: M. Rammohan Rao, dean of ISB. Bharath Sai / Mint
Echoed one current student on the campus of prestigious Hyderabad-based business school, who like other students there that Mint spoke to requested anonymity citing a school policy that forbids students from speaking with the media: “People are kind of a little surprised. We had expected much more detailed logic to be made public.”
Meanwhile, despite questions being asked by some students and some alumni of its dean, ISB distanced itself from the specific Satyam saga. The school’s spokesperson, Bhuvana Ramalingam, told Mint: “Dean Rao is on the board of Satyam in his individual capacity. I regret that I cannot facilitate questions on this issue.”
Mint has repeatedly attempted to contact Rao since 16 December, when Satyam’s $1.6 billion acquisition announcements were first made, to discuss his board role. Late Wednesday, Rao sent an email to Mint saying “I have participated as independent director in the Satyam Board in my individual capacity. I believe that I and all other Board members have acted in good faith. It is not appropriate to implicate ISB or other institutions in any way.”
While Rao, who did appear on a business television channel to defend the aborted deal, has kept mum since, other independent directors that Mint spoke to since have picked holes in Satyam management’s assertions about the board having signed off on the deal’s hefty valuation. Satyam management has steadfastly declined to provide key details on how it valued the transaction, which would have seen Rs7,658 crore paid to two infrastructure companies promoted by the family of Satyam chairman Ramalinga Raju.
Satyam’s shares have taken a pounding since management pulled the deal just hours after announcing it amid investor furore. On Wednesday, the shares fell another 3.88% on the Bombay Stock Exchange to close at Rs134.95 a share, down from Tuesday’s 52-week low of Rs140.40, with 128 million shares, or nearly 19% of Satyam’s equity, changing hands. The shares were trading at Rs226.50 before the deal was unveiled and are now down 41%.
Several ISB alumni that Mint spoke to didn’t want to be named because of their ongoing connection with their alma mater.
“It is more useful to have a statement from his side, to get clarity on what kind of stand he took and what kind of stand he is taking now,” said a Delhi-based ISB alumnus. “It is creating more and more questions with each passing day.”
“It is ironical that even the head of an institution grooming future leaders was not able to ensure checks and balances,” said another ISB alumnus who works with a consulting firm in Mumbai.
Because Satyam’s shares are also listed for trading in the US and many foreign institutional investors had bought its shares, the deal fiasco and questions about corporate governance in India have received significant attention in foreign media.
Rao’s presence on the Satyam board and his continued silence could potentially have some rub-off on ISB, which is trying to capitalize on a recent Financial Times ranking that put the institute among the Top 20 global business schools to increase its overseas student recruitment.
Those who know Rao said the problem lay with Satyam’s management and not necessarily the independent board members of the computer services company.
“The first thing is to figure out what actually happened, there are a lot of contradictory reports,” said Pramath Raj Sinha, currently managing director of 9.9 Mediaworx Pvt. Ltd and the founding dean of ISB. “The question to ask, with a board that had so many independent members, is what did the management do? I’m involved in several boards myself, and you trust the management in what they present to you.”
Some students saw similarities between the Satyam saga and case studies on corporate governance that are often discussed at the school.
“Surely everybody could figure out that the deal was not a really good deal,” said one student, who is specializing in marketing at ISB. Rao “should guide the students how to approach situations like these. How can board members influence decisions that are not going fine?”
Sinha recalled that ISB’s own board once had the CEO of Enron Corp. as well as the CEO of Merrill Lynch, two non-existing high-profile firms. “Companies fail, and things happen. But it doesn’t mean it has any effect on us.”
Mint’s Poornima Mohandas in Bangalore and Lison Joseph in Hyderabad, and Bloomberg’s Sumit Sharma contributed to this story.