Plug loopholes in corporate governance: Nasscom

Corporates on Wednesday expressed deep shock over the financial fraud in one of India’s leading information technology firms, Satyam Computer Services, and asked the Government to plug loopholes in corporate governance so that the confidence of companies and investors, particularly global, could be restored in the Indian corporate sector.

Terming it as a ‘stand-alone’ case of corporate governance failure, the apex body of IT and BPO industry, the National Association of Software and Service Companies (Nasscom), said: “This is not in any manner a reflection on the industry or corporate India. We will ensure that customers and other stakeholders get the right perspective. We will also work with the Satyam taskforce to reach out to their customers and employees and guide them through the transition.”

“This incident is particularly unfortunate as the Indian IT-BPO industry had set high standards of ethics and corporate governance. Nasscom advocates the highest standards of ethics for the industry and we will work with our membership to re-commit to maintaining the highest standards of governance and transparency,” it said, adding that the law will take its course (in the matter). Satyam’s Chairman and Founder B. Ramalinga Raju has once been Nasscom Chairman.

Chambers’ reaction


Similarly, top apex chambers have also expressed their disappointment over the entire episode and urged government and regulatory authorities to take immediate corrective measures. “Satyam was always seen as one of the top Indian IT companies and often represented as shining example of Indian liberalisation and entrepreneurship. This fraud on the investors and employees of the company shows a systemic breakdown in audit and board’s oversight of the company,” said Rajeev Chandrasekhar, MP and President, Federation of Indian Chambers of Commerce and Industry (FICCI).

Mr. Chandrasekhar stressed the need for regulators to move quickly to demonstrate that this was an exceptional case amongst corporates and that investors need not worry about Indian corporate governance and accounting standards. “This is critical to revive and rebuild the confidence and trust in India Inc amongst investors,” he added.

The Confederation of Indian Industry (CII) also called for immediate examination of the loopholes in regulation, accounting, audit and governance that allowed such lapses to occurThe Associated Chambers of Commerce and Industry of India (Assocham) demanded a special committee to be set up to investigate the entire Satyam issue so that culprits are identified and brought to book.

source: http://www.hindu.com/2009/01/08/stories/2009010854251600.htm

Satyam’s deal fiasco puts spotlight on governance

What were directors doing in approving Satyam’s $1.6 billion deal? Some $1 bn in market value destroyed

An independent director of Satyam Computer Services Ltd continued to defend the company’s decision to acquire two companies controlled by Satyam’s promoters for $1.6 billion (Rs7,568 crore) even after the computer services firm scrapped the deal in the face of intense and angry investor protest.

“We believed in it (the value-creating opportunity in the buyouts), not otherwise at all, ” said independent director V.S. Raju, in a phone interview with Mint.

The decision to call off the deal didn’t help Satyam’s cause, with the stock closing almost 30% down and brokerages and research firms releasing reports to their clients that termed Satyam’s act a “breach of trust” (ICICI Securities Ltd), and “daylight robbery” (Dolat Capital Market Pvt. Ltd). Deal or no deal, the “damage is done” said CLSA Asia Pacific Markets in its report.

Also See Whither independent directors?

“Our only regret is the reaction and we didn’t anticipate it (opposition to the deal),” added V.S. Raju.

Facing flak: B.Ramalinga Raju. Madhu Kapparath / Mint

Still, within 10 hours on Tuesday evening and early Wednesday morning, the board of the software firm first decided to spend $1.6 billion on acquisitions that would enrich the family of chairman B. Ramalinga Raju, and then decided to walk away from the deal.

Three independent directors on Satyam’s board—Raju, a former director of Indian Institute of Technology, Delhi; retired bureaucrat T. R. Prasad; and M. Rammohan Rao, dean of Indian School of Business—attended the first meeting. Two others—Vinod Dham, who designed the Pentium computer processor, and Mangalam Srinivasan, an academic with stints in University of California at Berkeley, and Harvard—and Krishna G. Palepu, a professor of business administration at Harvard Business School, who serves the company’s board as a non-executive director, phoned in.

Also See Fall from grace

Satyam’s chief operating officer Ram Mynampati and chairman Raju and his brother Rama Raju, who is managing director of Satyam, also sit on the board and attended the meeting.

All the directors phoned into the second meeting to pull the plug on the transactions.

Prasad declined comment. Rao could not be reached for comment on Wednesday. The directors based in the US also could not be reached by phone. Palepu is travelling and is currently in West Asia on business, his office said.

Still, analysts say the directors have some explaining to do.

“Despite Satyam’s reversal of its decision to buy out common promoter-owned realty and construction businesses, questions will linger on, perhaps for a long time,” wrote CLSA analysts Bhavtosh Vajpayee and Nimish Joshi in their report. “Why did the board not oppose the move? Who voted for and against the resolution? Was the board truly independent?”

source: www.livemint.com