Excerpts from an interview -
To what all do you attribute the government’s success in facilitating the sale of Satyam and that too, at an apparently good price?
I would say an effective partnership that was forged between the industry and the government worked well and made this happen. The government at various levels’the highest level, the political leadership and the bureaucracy’acted in tandem with a remarkable degree of decisiveness and swiftness.
As far as this ministry is concerned, we had previously set in place the structures and processes that were necessary to perform such huge tasks with a higher level of effectiveness and in the spirit of partnerships. This has helped the whole process enormously.
This ministry has reinvested itself in the last two-three years through a series of measures’ the re-naming of ministry in May last year in fact marked the culmination of a process of revamping the legal and administrative structures and processes. Our focus shifted to outcomes and working backwards, we evolved the processes that are compatible with that focus.
Partnerships don’t happen by themselves, you have to forge them, maintain them and make them work effectively. This ministry’s vision is to ‘be a leader and partner in initiatives for corporate reforms, good governance and enlightened regulation, with a view to promote and facilitate effective corporate functioning and investor protection.’ The idea of promotion involves a sense of ownership, and facilitation, a sense of ownership of the cause, not of the machinery.
In Satyam’s case, we (the government and the industry), had a common cause and we jointly worked for it. Once we decided what we wanted to do (that is, to separate the fraud from the company and let the company run), the obvious question was how to do that and also whether and how will the company work after a fraud of this magnitude.
These were the issues we had to tackle right at the beginning. The challenge was even more daunting as we had to take important decisions based on incomplete information.
So how exactly was the planning and action?
We appreciated that the real value of the company was not its tangible assets but the clients, employees and of course, its reputation. Of this, the third one had already taken a huge hit. So, the option to save the value of the company was limited to doing the necessary things with regard to clients and employees. Arranging the funds was also a challenge.
As soon as the task was defined at the highest level in the government, the ministry swung into action. As I said, the system were already in place. On January 7, Ramalinga Raju e-mailed his resignation to market regulator Sebi admitting to financial irregularities, which in less than two hours was forwarded to this ministry.
The same day, the ministry asked the ICAI and ICSI to enquire into the role of auditors and company secretaries for swift regulatory action. There was an emergency inter-ministerial meeting on 8th although it was a holiday. Concurrently, we in the ministry were drafting the petition to be filed before the Company Law Board.
The very next day, we got the CLB order superseding the Satyam Board with government-appointed directors. Clearly, we acted swiftly and thoughtfully. Satyam could not have been saved if there was any delay in decision-making. Investigations also progressed as swiftly as the process of salvaging Satyam. SFIO gave its report to the ministry on the day the highest bidder was found, i.e. April 13. The criminality angle is being probed by the CBI separately.
Will this (the handling of Satyam by the government and the regulators) set a precedent and enhance the expectations from the government?
Even if it does, one shouldn’t have an issue. The government is capable of rising up to such challenges. This might not be the first instance of such collective and decisive action by the government to salvage a sinking firm. But no two situations are the same in real life.
If Satyam has set a precedent, it is by breaking the belief that a billion and half dollar fraud is difficult to deal with. The government at the highest level decided to distinguish the fraud from the fact that Satyam was a high quality company. The concern was for the shareholders, the over 50,000 employees and the clients, many of whom Fortune 500 firms who have depended on Satyam for mission-critical support.
These people have not done any wrongs, one was bound to take note of. The clients of Satyam, several of whom are overseas, are as much victims of the fraud as the company’s non-promoter shareholders. So, we were aware of many things and the possible implications of the fraud, the global situation, India Inc.’s, especially the IT industry’s, image abroad, the clients’ predicament and above all, the credibility of the free market philosophy per se.
One question would be why should the government step in and help the shareholders, especially the big and institutional ones, who appear to not have done the due diligence while putting risk capital in the company’ That is a relevant question but note that in this case, the whole world except Ramalinga Raju and his accomplices was oblivious of the fraud. Risk-capital shareholders did not have the benefit of fair statement of accounts. So, the issue is not simply that of lack of due diligence.
Source: The Economic Times
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