It will be a December to remember in the year of a global meltdown and a local slowdown.
The saga of Satyam Computer Services, which first rolled back a controversial move to use the company’s cash chest to bankroll a land sale by another company controlled by the founding Raju family suddenly raised a question that could haunt India Inc in 2009: Is blood thicker than shareholding bonds?
“There is a need to look at this issue in a deliberative fashion. We will study issues involved and then take a decision,” SEBI chairman CB Bhave said of the Satyam affair involving group firm Maytas Infrastructure. Maytas is Satyam spelt backwards – and that turned out to be symbolic.
The cherished agenda of the Securities and Exchange Board of India (SEBI), asking for independent directors and shareholder activists to be watchdogs while calling for better compliance with global standards in disclosures and business practices is being tested through a reality check involving a New York Stock Exchange-listed company.
Satyam’s shares have been hammered twice in a month—the first over the land deal and the second time over World Bank’s blacklisting the company for its dubious deal-winning practices.
India is said to be better than other Asian nations in disclosure practices, but has miles to go. In the West, corporate governance is about making managements more accountable, while in India, it is often about protecting minority shareholders by disciplining the big-ticket shareholders.
“Ensuring good governance in family owned businesses is an issue and it should be addressed,” Adi Godrej, chairman of the Godrej group, recently told a conference on corporate governance.
“When the percentage of stake is low, there is temptation to take risk,” he said.
For mutual funds, this could be the hour of awakening.
Sukumar Rajah, Chief Investment Officer-Equity, Franklin Templeton Investments, India said, “Our endeavour is to focus on companies with higher quality management standards and in case of any corporate governance lapse, we look to limit the adverse consequences for our investors through various measures.”
At a conference held in early 2008, SEBI member T.C. Nair said companies need to set standards for themselves on financial integrity, financial transactions, transparency and accountability. “The SEBI framework on governance gives bare minimum requirements. The compliance must come from within companies,” he said.