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: The Indian IT industry seems to be caught in the midst of a perfect storm. Even as the government, acting in commendable fashion, began the process of resurrecting Satyam with the appointment of an independent board, the news that Wipro has been barred from business with the World Bank came as a blow. Wipro joined Satyam and Megasoft as three major Indian firms banned from business with the World Bank due to improper conduct. Wipro is barred because of its attempt to bribe an official, Satyam was banned for data theft and Megasoft for conflict of interest issues with a Bank employee. Taken together, the allegations don’t augur well for Indian IT, which survives and thrives on business from international markets. Wipro managed the disclosure well though, in coordination with the World Bank, to minimise damage to the firm’s reputation and stock price. For the moment, the damage for Wipro seems contained and limited. Yet, the whole matter raises serious issues about the way in which firms do business, particularly with government, inter-government and quasi-government agencies. Far too many of such contracts lack the necessary transparency and inevitably raise suspicions about how a company actually got a contract. US laws are very strict about American companies paying bribes to foreign officials. Indian laws on bribery—more particularly their enforcement—leave much to be desired.
Meanwhile, the fate of Satyam’s 53,000 employees and other stakeholders remains very uncertain. The government has done well by appointing three independent directors, but these gentlemen have their work cut out. They need to quickly, in consultation with the government, appoint the remainder of the board. And then the full board needs to appoint a new, credible senior management. The management would then need to lay bare all the facts about the troubled company. The government has offered short-term help in the form of liquidity. Still, there will be problems aplenty, especially with the class-action suits filed in the US. Multiple cases may be filed by aggrieved parties in India as well. As long as the list of liabilities is long, Satyam is unlikely to find any buyer. It’s going to take some deft management to get Satyam out of this mess—the new board and the new management will need much luck.
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