The fate of the "de-mutualised" IT Company is Interesting!
Technically there was no DPG -Dominant Promoter Group or CPG-Core Promoter Group in Satyam, as the original Promoters" Stake was less than 10 %.
So the top management had nothing to loose.There is nothing in it to motivate you to work hard .. .
Compare this with the 75 % plus Promoters" holdings in Companies like TCS or Wipro and their track records.
They also had plenty of Independent Directors on Board - of course they cannot take all the blame...is it not?. If this concept cannot work to safe-guard the investors, then it should be reviewed so that investors need not falsely believe the myth that, these IDs will ensure the safety of our investments.
Infact, the cost to Company may be higher because of these IDs,in most cases. it works typically like this : As soon as the date for the Board meeting is decided - in many cases, linked to a visit to Tirupati or Rishikesh- the Agenda with routine issues will be circulated to the Board Members. The important papers will be slipped in at the last minute just before the Board meeting.
Rooms booked in 5 Star Hotels, Airconditioned Car arranged for a couple of days, family taken care, flights booked to and fro,not to mention the dinners, etc.... at the cost of the / cost to the company.
The demutualisation - without a DPG/CPG might result in "nobody"s child" syndrome and the looser is always the retail investor.
BTW, personally speaking, i don"t want the Independent Director concept scrapped. I am a Professional with two decades of experience in capital markets and Industry. please allow me to enjoy these benefits one day in the future, if somebody chooses me as an Independent Director. let me not close the door before i get in . . .!
I simply can't understand how the audit firm Pricewaterhouse could have overlooked this scam, unless it has been (overstating the revenues / profits) a standard practice in the industry. I am sure that many other companies in the Indian IT sector would have overstated their revenues in the last few years and many such scams would come to light in the next few months.
ReplyDelete"Compare this with the 75 % plus Promoters" holdings in Companies like TCS or Wipro and their track records" - What about Infosys, where the promoters hold less than 15% of the company? Would they have been cooking something like Satyam, especially when their reported margins are around 25-30%?
You have raised an interesting issue, which needs to be debated in the public forum. However, the 'Satyam' issue is slightly different.It is much more than a mere accounting fraud. I see it as a nexus between a CEO and the politicians for political power and a 'Reality bite' in the Hyderabad megapolis. it is infact the failure of the Hyderabad model of development. I am afraid there may be many other skeletons waiting to be exposed amongst other Hyderabad based companies.
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