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Finders, book-keepers

To prevent another Satyam, we need a serious national debate on corporate conduct, writes Rajeev Chandrasekhar.

india Updated: Jan 14, 2009 01:18 IST

Reeling as India Inc. is under the globally originated credit tsunami and a locally created economic slowdown, the Satyam fraud is having the effect of causing additional sleepless nights to what is already feeling like a nightmare.

The questions that Satyam has thrown up are fundamental in a lot of ways. Some have characterised this as a form of corporate terrorism — a kind of 26/11 that has put at risk many thousands of investors and employees and their livelihoods.

If 26/11 placed the government and politicians under the scanner, the Satyam fraud places the Indian corporate sector and businessmen under similar scrutiny, of doubt and loss of credibility. While there are many efforts being made to characterise this as an aberration, that hypothesis is increasingly being looked at with scepticism.

So, apart from the disbelief and shock — with the architect of this fraud being one of the poster boys of Indian IT, and a product of Indian liberalisation — the most disconcerting aspect of the Satyam fraud is the growing worry among investors and regulators that this may be the tip of the iceberg and that there are more cases of profit-boosting embedded and hidden in the Indian markets. This is not a concern without basis because, in the last few years, a large number of companies have packaged themselves to tap the vast amounts of global liquidity and capital sloshing around the world, searching for returns, and doing so through IPOs and other market transactions — with active participation and help from investment bankers and other market intermediaries and, now it seems, even auditors.

All of this is causing even the most optimistic among us to be amazed at the ease with which a large number of companies seem to register significant growth, quarter on quarter. All of this is obviously very possible in a bull market and very difficult to sustain when the market decides to reverse!

I don’t want to, even for a moment, suggest that all the growth stories should be viewed with suspicion. But it is best to worry that there are other rotten apples in this basket. Given this, the actions that the government and the regulators take regarding Satyam are very important. Visibly punishing the group of people who have caused the collapse of a franchise and put at risk the entire Indian IT story for customers all over the world is vital. It will serve to send a strong signal to the other companies that are doing this, sending the message that if you do this or anything similar you
will go to jail and join the rogues gallery. Kenneth Lay and Jeffrey Skilling of Enron, Bernie Ebbers from WorldCom, Dennis Kozlowski of Tyco and Sanjay Kumar from Computer Associates — they are all in jail serving sentences, and our crooks need to go there too. If the government is really serious in its intention to send a message, it must make sure the prosecution process is completed fast, else it will become a classic case of ‘justice delayed is justice denied’.

One of the realities of in our country is that recent events have laid bare our marketing claims, hype and rhetoric, that of liberalisation having produced a new type of an Indian corporate — espousing good corporate governance and honesty as the norm — lionised and revered by a very willing and often gullible media. Actually the reverse is true, for they are the exception and not the norm. Increased opportunities and the significant effect of political influence and public policy on wealth creation have actually created more greed and far too many corporates that are determined to create wealth by walking the narrow line between right and wrong, very often straying into the wrong. This is the ugly side of economic liberalisation, made possible by weak enforcement of deliberately ambiguous public policy and regulation.

In a recent television programme about the Satyam fraud, the leading TV anchor said that the media in India have largely been focused on exposing political leaders and their scams and not as much on the corporate sector. The fact is that political scams are not possible without willing corporate scamsters. That there are many is obvious. So far they have only enriched themselves at the expense of the taxpayer. Satyam and its promoters have only expanded the scope of what our corporate scamsters are now seen as capable of doing.

So in addition to investigating, determining the guilty and punishing them in the Satyam case — if we are seriously interested, as a nation, to prevent this from happening again — let’s make corporate conduct, fraud and scams as serious an issue of national debate as governance, economic reforms and other things that dominate our lexicon today. Then and only then can we assure ourselves that there will be no more Satyams.

(Rajeev Chandrasekhar is a Member of Parliament and President, Ficci)