The Hindu Business Line : ‘Unjustifiable damage to Brand India, Brand IT’

Mumbai, Jan. 7 India Inc reacted with shock and dismay to the latest twist to the Satyam Computer Services episode on Wednesday when the chairman, Mr B. Ramalinga Raju, admitted to financial wrongdoing in a letter.

The Vice-Chairman and Managing Director of Mahindra & Mahindra, Mr Anand Mahindra, said in a statement that the development had “resulted in incalculable and unjustifiable damage to Brand India and Brand IT in particular.”

“What is especially ironic is that Satyam was started by entrepreneurs who have served as role models for an entire generation of young Indians. However, the feeling at the moment is one of cynicism, of being let down by one of the behemoths of the IT industry,” he added.

Mr Mahindra, however, reiterated that that the whole of the Indian industry “should not be tarred with the same brush” as most companies “uphold the highest standards of corporate governance and this will help us mitigate the damage done to India’s image.”

New ‘value’ thrust

Mr Anand Mahindra

He was optimistic that the “famed Indian resilience” would come into play and that from a “positive point of view”, the Indian investor would become “more discerning and see very strong and tangible value in integrity, ethics and values.”

Mr Mahindra cautioned that India Inc should not look to the government for all answers but speedily implement a ‘heal thyself’ mechanism. “We must view this as an opportunity to further strengthen our corporate governance framework,” he said.

Mr Kumar Mangalam Birla, Chairman of the Aditya Birla Group, said strong corporate governance must always be on top of an organisation’s agenda, as it is an important instrument of investor protection and maximisation of shareholders’ value.

A chief executive officer of an automotive company, who did not want to be named, said the episode would tarnish India’s image and the IT sector, in particular, would suffer in the process. “There is absolutely no question that companies, promoters, independent directors and auditors will come under the scanner like never before. Investors are going to perceive private entities with scepticism and distrust for a long while to come,” he said.

‘No rationale’

What has baffled CEOs is the move by Mr Raju to draft a “confessionary note” on the entire issue. As one of them put it, “There is absolutely no rationale for this step. Why was he putting all this on record instead of letting the law take its own course? Either ways, his goose would have been cooked but this letter has messed up the entire situation with the entire country privy to the goings-on within Satyam.”

A promoter of a pharmaceutical company concurred with this view, adding that the road ahead would see the Centre insisting on multiple auditors to guarantee shareholder interest and prevent an encore elsewhere.

Independent directors

A section of promoters have been irked by the constant reference to the role and accountability of independent directors, which was magnified in the entire Satyam drama after some of them stepped down when trouble first began brewing.

Terming it “naïve and presumptuous” to assume that they would be in the know of daily operations, a chief executive said that ongoing strategic initiatives would only be in the domain of key board members till a final decision was reached. “It is only then that the independent director is apprised of this because we cannot risk sensitive information being leaked out to competitors well in advance,” he said.