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Whom will you trust now?

Dec 18, 2008

"I'm not upset that you lied to me, I'm upset that from now on I can't believe you." - Friedrich Nietzsche, German classical scholar and philosopher Satyam’s announcement of transferring funds to promoter group companies by buying stakes in the latter raises a stink. It leads to you doubt the faith that you put on a company’s management, its independent directors, auditors, consultants and rating agencies. Simply put, it shakes your entire chain of belief that you had on these parties.

In Satyam’s case, you have a chain which had all its links weak. The management had no sense of defense for the announcement it made. Independent directors passing such a resolution, is equally horrifying. And where were the auditors when the deal was being finalised? What about the consultants who advised on the same? What faith does one has on rating agencies that rated Satyam high on corporate governance? Shockingly, Satyam was recently awarded the Golden Peacock award for corporate governance for 2008!

"You are putting the whole FDI story of India at risk by adopting such third grade corporate governance practices," said one of the participants in Satyam’s analyst call to discuss the transaction. We second this gentleman’s thought!

Another one said - "We do not want this decision to be taken and we are willing to go to any length to prevent this thing from happening. Apart from the odd ownership which you have and the management opposition you enjoy in the company, there are also minority shareholders which are existing and we think that it will be in the best interest that Satyam withdraws this proposal."

This one is our favourite - "The company's goal is to find creative and productive ways to delight its stakeholders," says the first paragraph on corporate governance in Satyam’s FY08 annual report. We now know what creativity can be all about! And do they teach such ‘creativity’ in US biz schools? Wondering because Mr. Ramalinga Raju gave enough stress that the two companies - Maytas Infra and Maytas Properties - are indeed being managed by his sons, both of whom have done their MBAs from the US!

Anyways, Business Line reports that Satyam is now planning a share buyback to appease investors. Let them buy. You must know what to do!


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