A new board for Satyam

A new board for Satyam
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First Published: Sun, Jan 11 2009. 08 55 PM IST
Updated: Sun, Jan 11 2009. 08 55 PM IST
The appointment of banker Deepak Parekh, IT expert Kiran Karnik and former Sebi member C. Achuthan to the board of directors of Satyam Computer Services Ltd is a step in the right direction. But it is only a first step. In any case, the Union government should eschew bureaucratic appointments to Satyam’s board.
The problem is serious. News reports suggest intense jockeying for director positions by companies that hold Satyam shares. There are indications that the Andhra Pradesh government wants its nominee on the board. If the appointments are left to the department of company affairs, it would surprise no one if bureaucrats were appointed directors.
Such a step would be sure to create more problems than solutions. Bureaucratic skills are not what the beleaguered company needs at the moment. People with financial management skills and those who have experience in running large IT companies are badly needed.
The question is not only about salvaging Satyam, it’s also about ensuring that India’s IT industry does not suffer because of one isolated incident of corporate malfeasance. In such a situation, if the Union government were to request other large IT companies to share their talent pool with Satyam, a positive response is certain to emerge.
If Satyam survives, these emergency appointments will be crucial in ensuring a sound corporate governance structure for the company.
There is strong evidence that independent directors are more often independent in name alone. Even if it is ensured that independent directors have no financial or other interests in a company, similar social backgrounds between such directors and company management can result in monitoring problems emerging through the back door. At least two former independent directors of Satyam had such characteristics. If the government does not pay attention in selecting Satyam’s new directors, these problems can return in myriad ways, ones that will be impossible to detect until trouble erupts again. The least that the government can do at this moment is to be transparent in making further appointments. When it issues a warrant of appointment, it should specify the reasons for its choice clearly. It should not squander the possibility of reviving Satyam.
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First Published: Sun, Jan 11 2009. 08 55 PM IST