Satyam scandal puts Enron into the shade
Noor Mohammad Delhi
When the American energy multinational Enron Corp collapsed in November 2001 after disclosures of shocking financial frauds by its top management, many in India found an opportunity to gloat at the efficacy of the Indian business regulatory system. But ironically, similar things were also cooking up at the same time at Satyam Computers, one of the country's leading corporate houses. It is another matter that things came to light only when the Satyam's management ran out of ideas on how to keep the financial jugglery under wraps. Until then, Chairman B Ramalinga Raju along with other members of the Satayam's board and management had a field day cheating investors by manipulating account books and making grossly false disclosures to the stock exchanges where the company is listed.
It is shocking that the company's management was committing financial jugglery for so many years, but no regulatory authority or financial crime prevention agency could get a wind of it. Hardnews investigations clearly show that even the mandatory corporate governance measures enforced by stock market watchdog Stock Exchange Board of India (SEBI), such as appointment of independent directors on the company's board, third party audit of accounts and strict disclosure norms failed to deter the Satyam's promoters from committing frauds and siphoning off investors' money. Obviously, all this underlines a serious systemic failure to protect investors' interests in companies raising money from stock markets.
As it happens in all such cases, probes have been ordered by regulatory authorities and the government, for its part, has stated its resolve to punish perpetrators of the frauds. However, the moot question remains whether the duped investors will get their money back. Learning its lessons from the Enron scandal, the US government brought in the stringent SARBANES-OXLEY ACT OF 2002. The act is designed to ensure accuracy and reliability of corporate disclosures by requiring certification of the quarterly and annual reports by the chief executive and financial officers, among other things. It also provides for tough penal actions for company officials, directors found guilty of tampering with company accounts, records.
The US government has refused to dilute the act despite businesses complaining that the provisions of the act are too complex and require disproportionately high compliance costs.It remains to be seen if the Indian government also undertakes a wholesale review of the existing supervisory regulations to prevent repeat of such high-level frauds in the Indian corporate world, or if it gets back to the business-as-usual mode after the initial public outrage over the incident subsides.