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The Satyam Saga

December 31, 2008

Being in India has meant that I’ve seen the Satyam saga unfold up close and personal with the extensive media coverage. The media seems like a wild cat ready to pounce on fresh meat. There is no semblance of respect for a company that has been a beacon of Indian IT success. The endless hypotheticals and coverage that includes theme music and a logo affecting the livelihood of 50,000 employees sickens me.

I might be really dense but what has the company done wrong really? They wanted to invest in a sister firm, isnt that the instinct of any family-owned business? People who buy shares in a family-owned firm should surely know the risk before investing. I work in the biggest company in its industry and it is family run.

Nobody is saying that it was a daft decision. Nobody is arguing that the return on investment would be lower than if the same amount was invested in a competitor. The only issue is “misgovernance” which is of concern to shareholders.

I’ve gone beyond the point of rage to a sadness that this is how much the media cares. Surely, this can’t be the result of freedom of press in the world’s largest democracy.

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From → Business

5 Comments
  1. I so agree with you on the gist of the post. The media should be more involved without a shred of doubt. However, I don’t agree with your statement that “People who buy shares in a family-owner firm should surely know the risk before investing”. The blame shouldn’t be with the investors, but with the securities and exchange commission for poor enforcement of corporate governance laws, the ‘independent directors’ for their being in bed with Raju, and the government for not looking more into this. I believe the directors should be held criminally liable in this case.

    http://captainmolecule.wordpress.com/2008/12/18/corporate-governance-in-india/

  2. I’m Uma Thurman? Raight. No wonder.

  3. Captain molecule: Criminal liability? Thats a disproportionate response man. Criminal liability needs malicious intent, this is simply a question of not following due process which isnt even established in Indian laws. I still believe that there is a fundamental difference in family-owned firms from independent ones and shareholders would be naiive to expect similar levels of transparency.
    My issue, by and large is with the media though. This is not “What would you do if you were a Satyam director” like we do on Dial C for Cricket which attempt to make everyone into Indian cricket captains.

    Unpred: Heat, baybee. what to do. 🙂

  4. A conflict of interest does amount to malicious intent – defrauding investors for personal gain. The due process is established in the laws unfortunately. We have pretty well defined laws on how to deal with issues like these – check out clause 49 (with amendments) of the SEBI corporate governance act. It lays out a considerable number of duties the director as and also quite clearly states the following:

    ——
    III. Additional duty on the independent director

    An independent director would be supposed to periodically review the legal compliance reports prepared by the Company and steps taken by the Company to improve the taints. Further, in case of any proceedings against him, defence of ignorance of this responsibility shall not be permitted.
    ——-

    “defence of ignorance of this responsibility shall not be permitted”.

    http://www.iiaindia.org/docs/SEBI-Clause%2049-Amendments.doc

  5. Dude, not sure where it says criminal prosecution if individuals fail responsibility. Irrespective, I’d argue that criminal jurisdiction only applies with specific intent to cause harm and also usually the damage is not purely financial. If this was actionable under criminal law, the court would look to punish Satyam’s board (with jail time?) whereas under civil law the focus would be to only compensate the “victims” for their damages.

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