Satyam Saga

Just when we thought we learnt a lesson from Enron, another corporate scandal rolls in. This time, its Satyam Computers-Indian Software conglomerate. The truth is corporate greed doesn’t have national boundaries. The small investors remain with leftover pieces of puzzle and business schools get another case study. Sadly not much more happens after such mind blowing scams… Enron was cooking its books for years and Arthur Anderson; its independent auditors overlooked it for years. The collapse of the Enron caused the collapse of the AA and we were left with Big 4 instead of Big 5. Sarbanes-Oxley Act rolled in. All corporations made a big push for Corporate Governance and Control. It seemed that, finally, the corporate books were trying to look clean. Now the Satyam scandal bursts that bubble of trust all over again. This time it’s Price WaterHouse Coopers. Its auditors failed to do their due diligence and Satyam Owners could commit fraud of mind blowing proportions.

The internet has got the globe connected and world economies have become even more interdependent. So just overlooking the Satyam as Indian IT scam is a mistake. Its global implications are enormous. The Auditors ought to be independent no matter what. The auditing standards should be same across the world. We need to stop having different sets of regulations and accounting standards for different nations. One set of standards should govern the universe. The punishment for all those involved in such scam should be as strict as possible. In this global economy, the word transparency should hold its meaning. The PWC is just as responsible for assisting the scam as much as the founders who did it.

The corporate ethics demand the need of separation of duties and tight audit controls for all publicly traded corporations. With Sarbanes-Oxley act, these rules were reinstated in USA. It was a major undertaking for US corporations to reassure their confidence after Enron scam. The same should be applicable for all companies traded on American Stock Exchange. The worldwide recession has already given a major blow to the investor confidence. Such scandals make it worse. Indian Software companies are going to learn it the hard way. Just competing on the price differential is not enough. Quality, commitment and assurance are essential parts of winning equation. Sadly, all of these three values came in doubt after Satyam Scam. Once lost, it’s very hard to restore the trust and confidence. The effects of Satyam collapse therefore are far more than just monetary numbers. In a negations class, I remember learning “its ok to loose a deal but not ok loose your trust and Goodwill’. Sadly, that trust is once again lost ……..