Rs 1.5 crore. That?s how much Satyam paid in 2006-07 to the five non-executive independent directors on its board, including luminaries like former Cabinet secretary TR Prasad, ?Father of the Pentium? Vinod Dham and Harvard Business School senior associate dean Krishna G Palepu.
On Tuesday, when the Satyam board met to decide the Maytas buyouts, chairman Ramalinga Raju and brother B Rama Raju are learnt to have abstained from the vote. A senior Satyam official claims that all seven other board members, including president Ram Mynampati and six non-executive independent directors, voted unanimously for the deal.
Of the Rs 1.5 crore paid to non-executive directors, almost Rs 1 crore was paid to Palepu, who specialises in strategy and corporate governance. While his work on strategy focuses on globalisation of emerging markets like China and India, in the area of corporate governance, he focuses on improving disclosure and making corporate boards more effective.
Good corporate governance and Satyam Computer Services may not be used in the same sentence after Tuesday. But Palepu?s academic work, coinciding with his board seat, gives him a unique vantage point into the deal gone wrong. In 2003, when Palepu joined the Satyam Board with Dham, a research paper he published with Harvard colleague Tarun Khanna examined how globalisation affected corporate governance of firms in the Indian software industry.
Ironically, the study examined why Infosys has emerged a beacon of good corporate governance in India, traditionally a backwater of such practices. Palepu and Khanna also sought to understand how Infosys? attempts to shape corporate governance practices in India have had limited effect.
What prodded so many independent bright minds, including Palepu, to agree to a deal that pundits around the world have slammed will remain a mystery. But a hint about Satyam?s priorities may lie in its mission statement on good governance.
?The principle of ?delighting stakeholder? is imbibed in everything we do,? Satyam?s annual corporate governance report says. Satyam defines stakeholder as ?associates, investors, customers and society?, but the latest events suggest that is the order of importance in which stakeholders are held. Associates before investors; customers before society.
Seemingly minor differences in the corporate governance practices prescribed for US-listed companies and those followed by Satyam could also hold part of the answer. For instance, New York Stock Exchange (NYSE) listing norms require that ?non-management? (independent) directors of each company must meet regularly without management. Satyam doesn?t have such a system in place. Secondly, NYSE-listed firms must have a corporate governance panel composed entirely of independent board members. The panel identifies new board members, director nominees to attend shareholders? meetings and conducts an annual compliance review of the corporate governance norms it lays down. No such panel exists at Satyam.
While CFO Srinivas Vadlamani sought to assuage concerns about misgovernance, another senior company official said, ?A lot of our clients who are in non-IT businesses have been approaching us to buy them. But I think the motive behind the Maytas deal was that the promoters were familiar with the real estate industry and there was a great level of comfort. We still have some of those buyout requests pending with us.?
