Monday, January 12, 2009

Does Satyam represent India?

Janmejaya Sinha does the right thing in calling a foul on those columnists who are using the Satyam fraud to beat up on India and the Indian corporate sector:

Quite a few commentators have opined that Ramalinga Raju's fraud (which may yet end up killing the company he founded) is a blot on India's IT sector, India's corporate sector, or even India itself. This is not only absurd, but it's also an insult to a whole bunch of law-abiding CEOs and their companies. Singur (as also some of the intra-corporate 'satrapship' problems) notwithstanding, the Tatas continue to enjoy a reputation for integrity, and so do Infosys, TVS and Sundaram groups, HDFC and HDFC Bank, L&T, Unilever India, and many, many others.

However, I am completely surprised by the reaction of so many wise people on what the scandal means for India. One writer in one of the Indian dailies, a Lord no less, wrote with amazing pathos: “even as recently as August 2008, India was touted as a success story, …we all knew it was a bit of Davos dalliance. But now four months later, after the September terror attacks in Delhi …26/11 and now Satyam, India is not shining. Will it ever again?” And there are others asking corporate India to walk further to prove its credentials.

I am surprised that corporate India and, indeed, India needs to carry such a burden. The tone of the writing smacks of a colonial hang up still evident after more than 60 years of independence and in the midst of the Madoff scandal and, indeed, the fall of the global financial system as we knew it.

Clearly, the Satyam episode has revealed that there are significant holes in our legal / regulatory / governance systems, which allowed Raju and his gang of thieves to get on with cooking the books, as Raju himself admits, for several years. I'm sure investigations will reveal where they are, and suggest ways of plugging them.

India, as a country, comes into the Satyam story only in how the investigations proceed, and what it does with the results. While the government's initial tardiness -- Sinha cites reports "that the authorities moved in late to seal the company accounts" -- is indeed disappointing, its move to reconstitute the board of directors (with the appointment of people of integrity, such as Deepak Parekh) is encouraging.

In the meantime, "Satyam=India" equations

  • take the focus away from what needs to be done (a) to get to the bottom of this fraud as speedily as possible, and (b) to salvage Satyam's core operations which, by all indications, are profit-making and hence, worth preserving,

  • are an insult to so many of the country's law-abiding companies, their executives and yes, their boards (e.g., the Tata group, the TVS group, Infosys, L&T, Unilever India), and

  • are intellectually lazy.