Satyam - An Aberration or a Sign of Corporate Maleficence?

Today's admissions by Ramalinga Raju, the former CEO of Satyam Computers, to the largest corporate fraud in Indian history could not have come at a worse time for corporate India. With the world economy in a tailspin , caused by the US subprime crisis, and growth in India slowing, this crisis to one of Indian software industries titans could have devastating impact on the Indian economy.

First there is the question of jobs. With Satyam employing 53,000 people, barring any miracle, most of these people would lose their jobs. With the IT sector hit hard by the economic downturn in the United States, and the other big three IT giants (TCS, Wipro and Infosys) dealing with layoffs of their own, there is not much appetite to accommodate any of the 53,000 employees who will be laid off.

Second, there is the question of regulation, lack of oversight and independence. I find it hard to believe, no matter what Ramalinga Raju said in his letter to the board of directors and government regulators about none of the senior management and directors knowing that he was cooking the books. If Ramalinga Raju acted in this alone, then none of the BOD and senior management is fit to serve the company. But if the senior management and BOD's knew and kept the shareholders, regulators and the employees in the dark, then are as guilty as him and must face the same fate as Ramalinga Raju.

Third, there is the question of the regulators role in letting this happen. This scandal, which some are calling India's Enron, puts the focus on the whether there is enough governmental oversight and proper corporate governance in all of the publicly traded companies. If this thing can happen in what was until recently a very respected company, claiming 150 of the Fortune 500 companies as its clients, what is there to stop this from happening in any other company. Was Satyam just an aberration or is it the first domino to fall from the cupboard of corporate maleficence that may be pervasive across corporate India? Should we believe the venerable Narayana Murthy when he says that this was an isolated case and a failure of governance?

Finally, all of corporate India will be watching the authorities to see how fast they can get to the bottom of this. If there is even a hit of favouritism or corruption in how the case is handled, then the image of India as a emerging economy will suffer. If foreign and domestic investors cannot trust the authorities to do the job of safeguarding their investments and regulating a free and fair market, then investment will dry up and so will the economic engine. The boom that India has enjoyed over the last two decades will be just a blip in the radar screen.

This crisis gives India an opportunity to show the world that when it comes to free and fair markets and ethical corporate governance, India is second to none. It must show the world that no matter who the guilty person in this scandal is, they will be brought to justice. The future of India depends on it.