As a fresh articled clerk with PwC, I still remember that my first day in the company was spent with bank statements and original fixed deposit receipts given by clients. I had to confirm that the actual cash is physically lying in the bank and a confirmatory statement from the bank is submitted. Reading the Satyam debacle ? I thought ? have we got rid of all our time-tested good practices and following only power point presentations these days?
Satyam is today ? Enron of India ? no less. And, this incident raises so many questions that businessmen, professionals, shareholders et al will find it difficult to find answers to. There will be a seachange in the way we manage our affairs and appoint independent directors. Should this be on the basis of profile or actual achievements or should they be in the board only with a supervisory role? The role of every stakeholder in listed companies will now see a paradigm shift if Indian corporates have to shed this stigma and stand up as a pinnacle of pride in the forthcoming years.
Whistle blower- Everybody must be wondering where the professionals are inside the organisation who must have used the word so frequently ? when the MCAP of Satyam was at its peak and those non-existent profits were showing in public domain. It would be interesting to know why the CMD alone should be blamed and what will happen to finance directors and financial controllers. What was their role during these ten years? What were the internal audit and audit committee doing? Is it a wholesome collusion between all these agencies involved?
Auditor- We have seen the sad demise of Arthur Andersen and have not learnt anything. If this is being perpetrated for last ten years ? is there any chance that an auditor like PwC will not know about it?
Independent directors- Can we blame them for such a scenario at all? They come for four or six board meetings in a year ? look at broader issues ? discuss the big picture ? and then take a nominal amount and put their reputation on the line. I am sure if PwC has certified some accounts ? they will not look into the nitty-gritties of the same again. The question remains after the Kampani episode and this one ? that where are all the independent directors drawing flaks for no fault of theirs.
Investment climate- The global turmoil already took its toll and now this will ensure that at least in the short and even in the medium term, global investors, who certainly have been taken for a ride in this case ? Aberdeen is a case in point ? will shy away from Indian companies.
Role model directors- In most companies ? there are reputed professionals and role-model profiles who are retained as directors. Today, the effectiveness of such high profile people could also be questioned by various sections of stakeholders. The question is, who will be the real guardian of minority shareholders?
Private vs public ownership- The thought process coming up very strongly is how is there better corporate governance in public enterprises today, compared to private ones? Is there something more to learn from them and could there be regulatory changes to protect such fraud? The authorities have to sincerely think about it.
Retail & small shareholders- They are the people who will be most negatively impacted by all these developments and there should be concentrated efforts to protect them from such events and compensate them from the set of shareholders who have been benefited from such wrong doings.
Finally, it could be the opinion of a number of stakeholders in India Inc that the law must take its own course, but certainly in a way that the confidence comes back, and deterrent and swift punishment meted out to those who did it and who abetted it in a way that future recurrence is spontaneously controlled, if not eliminated.
The only silver lining in the entire episode could be that the world recognises that it is a single company that has encouraged such practice in India. If we could ensure this and it does not become a contagion like forex losses that came out as an epidemic, then corporate India and stakeholders should take this as a learning lesson, albeit expensive.
The author is Group CFO of the Hinduja group