The price of advice

Sudipta Datta
Posted: 2009-01-11 22:59:45+05:30 IST
Updated: Jan 11, 2009 at 2259 hrs IST

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: In 2007-08, IT bellwether Infosys spent Rs 4 crore on commissions and sitting fees for its eight independent directors, which includes such names as David Boyles, ex-ANZ, Amex, Bank of America who now runs a boutique consulting practice, Prof Jeffrey Lehman, and Deepak Satwalekar, MD and CEO, HDFC Standard Life Insurance. India’s largest IT company Tata Consultancy Services’ bill was Rs 3 crore - it has six independent directors, including Naresh Chandra, former cabinet secretary, Laura Cha, non-executive chairman of HSBC Investment Asia Holdings, former Deutsche Telecom chairman Ron Summer and Harvard professor Clayton Christensen; Wipro spent Rs 86-odd lakhs on its six independent directors, including N Vaghul, also chairman of the board of ICICI, Ashok Ganguly, Bill Owens, former CEO of Nortel, and Prof Jagdish Sheth. Beleagured IT company Satyam, India’s fourth largest software company, paid one independent director Rs 79 lakhs in two years. On its board were such stalwarts as Vinod Dham, father of the Pentium chip, Harvard Business School professor Krishna Palepu and ISB dean Rammohan Rao, who all resigned after the Satyam crisis came to light. The question analysts and experts are asking is how did a venerable team of independent directors gloss over the fineprint at Satyam? In short, how did a Rs 7,000 crore hole in the company books go undetected? How “independent” are independent directors? Did any one of them voice their dissent? After the Maytas acquisition was stopped by shareholder activism, the spotlight was on independent directors. “Given the universal denial of the deal by investors, where was the board of directors in terms of applying oversight and vetting the validity of the acquisitions?” said Forrester. But with Satyam founder and chairman Ramalinga Raju himself admitting to fraud played out over several years, it’s clear that corporate governance mechanisms have been missing.