Deputy Editor Venkatesha Babu
Six years after he made a dramatic confession of committing fraud to the tune of Rs 7,136 crore, Satyam's founder B. Ramalinga Raju has been sentenced to a seven-year jail term
and levied a Rs 5-crore fine.
Several of his co-conspirators have also been handed out similar jail terms.
For many observers, analysts and shareholders, the verdict of the court may have been disappointing, and Raju as well as his co-accused have the option to appeal to a higher court.
While the Rs 14,000 crore lost in investor wealth in the Satyam saga may never be recouped, today's verdict proves that there are at least some positive takeaways -
- Strengthening of systems and processes: What the Satyam case exposed were weaknesses in our regulatory system and lack of adequate investor protection. How did the top management of one of India's best known IT companies get away with fraud and that, too, for so long? Only when Raju, exhausted after riding the tiger of lies, tried to dismount by confessing did it even come to light. Since then SEBI and other regulatory agencies have plugged loopholes for which they must get credit. Investor protection is better than what it was in 2009. Has it meant that fraud and manipulation has disappeared? Not really, but just as criminals find newer ways to commit a crime, law enforcement keeps pace. The Satyam case provided a wake-up call that helped strengthen accounting and regulatory practices. The authorities have improved reporting and transparency at least in some aspects.
- IT sector response: When Satyam started imploding, not just shareholder wealth but other stakeholders were impacted too. For instance, thousands of employee jobs were on the line. Nasscom, government and the Indian IT sector in general must be complimented for the manner in which this crisis was handled. Even Satyam's competitors, who could have exploited the situation to their advantage by taking away key employees and customers, showed a rare degree of restraint. In fact, a number of Indian IT companies consciously eschewed from stamping on a fallen competitor. A great degree of maturity was shown by leading IT companies, industry bodies, government and regulatory agencies in helping the company get back on its feet.
- Revival and growth: The manner in which the company was eventually sold was exemplary. Mahindras won it fair and square in a transparent bidding process. Again, this is an example of how a good company with poor management could be salvaged. If and when some of the PSUs are transferred to the private sector, the Satyam process can provide a template on how it could be done. While the Mahindras did face hiccups in terms of tax demand notices on fictitious revenue billed, eventually some were paid, others contested but mostly resolved to the satisfaction of everybody. Mahindras merged their existing IT holdings into Satyam to form Tech Mahindra, which is today one of the fastest growing Tier I Indian IT firms.
- Wheels of justice may grind slowly but they do surely: In a country where there is a huge backlog of cases that takes decades to arrive at closure, a verdict has been pronounced in a relative short span of six years in a case on white-collar corporate fraud involving some well known names. The investigating agencies and the judicial machinery need to be complimented for this.
- Good corporate governance practices: What the Satyam saga also ensured is that it has become much harder to nominate your golfing buddy as a director of your public company. It also brought upfront what a board can do in ensuring good corporate governance practices. Diversity in the boardroom and not just people lending their names has meant sharper scrutiny of managements.