In hindsight, the unravelling of the Rs 12,000-crore accounting scam at the IT major Satyam two years ago was overbilled as India?s Enron moment. Satyam?s likeness with Enron (the early 2000s infamous case of now defunct US energy major cooking its books systematically?and uncovering soon after other scandals of its ilk like Tyco and WorldCom?which spawned the tough Sarbanes-Oxley Act, or SOX, that put the fear of God in US businesses) looks overstretched.
True, the scam?s chief perpetrator, promoter Ramalinga Raju, was put behind bars, and the auditor Price Waterhouse was hauled over coals, but the wrongdoings at Satyam were perceived more as ?personal infidelity? rather than a systemic risk, and therefore its solution too was one-off?the government quickly stepped in and sold the company to keep its business going. Period.
Did Satyam change the way businesses in India managed or manipulated the environment? Did it teach them that there are grave business perils of crony capitalism and unjustifiably influencing policy? Or that there is a direct, not inverse, relationship between probity and profits? Or that there are no sacred cows when it comes to public good?
The answer is a big no. Cooking up books was the dumbest way to show profits or siphon away funds, when there were a million ways to make ?real money? without the danger of getting caught with your pants down. Yes, his fudging was a ?piece of art?, as one government nominee salvaging Satyam once mentioned, but surely Raju wasn?t na?ve enough to believe that such blatant illegality was sustainable. No wonder, Indian businesses paid mere lip service to better corporate governance and disclosure policies in the wake of Satyam, and moved on with their old, often corrupt ways.
In contrast, the Enron-inspired SOX fundamentally changed US businesses. The possibility of physical risk (jailing, in short) for the first time becoming a reality for the US business executives, and not just for malafide intent but even for reporting errors, created an all round atmosphere of utmost vigilance that made any wrongdoing easily detectable. In the fast and furious legalistic society like the US, the ?clear and present? danger of ending up in jail did wonders for corporate governance. But in India, the long and often inconclusive investigative process, followed by endemic judicial delays that virtually ensures that most economic offenders remain out of harm?s way, made sure that most corporate governance measures remain just compliance issues, ticking-the-box approach as it may. Though Satyam did sully the sweaky clean image of Indian IT globally, the crisis itself was very company specific, and like it or not, everyone just shrugged it off as a case of just ?one bad apple?.
Cut to the present, in fact the last year or so. The hullabaloo over the Commonwealth Games, Indian Premier League, 2G, wire-tap controversy, illegal mining, loans-for-bribes and various other scams, some quite unrelated to businesses, have had an unintended, yet life-changing impact on how businesses in India will henceforth conduct themselves. And quite like the post-Enron moment for US businesses, of late there has been a feeling that the whole ?business of the country? is coming unstuck. There is a feeling of a systemic rot and collapse, and that, fortunately, has led to a resolve amongst policy makers and businesses alike to steel the moral timber across the polity.
It?s true that our oversight mechanisms haven?t changed much in the last five years, barring the Right to Information Act, which has had a fairly mixed record in attempting to make government more open. We have the same government auditor (CAG), the same investigating agency (CBI), the same regulator (Sebi), and the same, often combatant judiciary and the media.
But somehow the tumbling of one corruption skeleton after another?whether its was government contracts in CWG or awarding scarce national resource like spectrum or minerals in others?has willy-nily created an atmosphere where it is increasingly becoming difficult for businesses of all manner not just to ?manage? the environment, but even to hide perceptions of past wrongdoings. Much like the Arab world dictators, Indian businessmen could manipulate the environment only till the time there was a symmetry of information. With information and opinions becoming available on real-time basis, thanks to technology and the media, happily that luxury of hiding and fudging information is forever lost on company spin doctors. The hammering of selective stocks associated with some of these scams shows the investor community?s uneasiness in putting their money with these perceived offenders. Old institutional investors walking out or new partnerships coming unstuck for perceived public trust deficit is becoming common now, clearly putting a premium on corporate openness and honesty. The RTI Act empowered the ordinary citizen to demand accountability from the government. And the pending Whistleblowers Bill will give an additional push to clean government, this time by encouraging insiders to raise the red flag on corruption.
In this new atmosphere of bringing the guilty to book, many regulators, too, are emboldened to inflict exemplary punishment on big errants like never before.
With the media, the Opposition and the judiciary upping the ante on corruption within the government ranks, a collateral damage has been the hitherto unassailable status of some companies and their bigger-than-life CEOs. The concomitant public glare, though sometimes wholly unjustified, is putting many businesses, among them some global subsidiaries of big multinationals, in an uneasy spotlight. This public opinion is making businesses sit up and revisit fundamental questions on business ethics?the third missing element of the good corporate governance plank, the other two being strong internal controls and strong financial checks.
shailesh.dobhal@expressindia.com