For a long time, curricula in Indian schools included a subject called moral science—there were even moral science text books—which adopted an adage-heavy and moralistic approach to instilling values in students. One of these adages, still to be encountered in the idiom-heavy English that newspapers, including this one, uses, has to do with people (or companies) learning from mistakes—their own, and that of others.
This rarely happens and, when it does, the results are far from ideal.
Evidence to this effect can once again be found in l’affaire Satyam—the anniversary of the discovery of this fraud is upon us. The ministry of corporate affairs has been active this past year, investigating the fraud and ensuring that it isn’t repeated. It has an early warning system in place, and is steering through Parliament a law that requires more disclosures from companies as well as more stringent punishment for wrongdoers, but while this will definitely make promoters and executives think twice before perpetrating a fraud (apart from increasing the number of papers they have to file with various government agencies), it may not be enough to prevent frauds. Still, bureaucratic procedures can always be simplified.
Illustration: Jayachandran / Mint
The big change that the Satyam fraud has brought about is psychological.
Investors and analysts, meanwhile, would appear to have become more sceptical. They are no longer willing to take what companies say at face value and are increasingly beginning to seek data that backs these claims. But scepticism fades with time, especially in a booming economy.
In the case of promoters, directors, executives and auditors, the change has to do with fear. Satyam founder Ramalinga Raju, his key aides, and the two Price Waterhouse auditors who signed off on Satyam’s books are still in jail. No one wants to go to jail, leave alone languish there for a year waiting for court proceedings to start. Few people are willing to be independent directors on a company’s board because there is a growing fear that they could be held culpable for frauds at the company. Surprisingly, the independent directors who sat through Raju’s misdeeds at Satyam are still at large. And auditors are beginning to crunch the numbers long and hard before signing off on financial statements.
Fear is an enduring emotion and that may well be the most significant legacy of a fraud that shook India.
Did India learn anything from the Satyam affair? Tell us at firstname.lastname@example.org