“Legislation should not punish law-abiding entrepreneurs”
The Satyam accounting scam should be treated as a one-off affair in India. Subsequent legislations targeting these frauds should not be so stringent as to the majority of entrepreneurs who are law-abiding are made to suffer, said T.N. Manoharan, Chairman of Confederation of Indian Industry (CII) national committee on accounting standards.
He is among the two directors - of the total six appointed by the Government to revive the Satyam Computer Services after the Rs.5,000 crore accounting scandal came to light - to still continue after its takeover by Tech Mahindra. He was addressing a session on ‘Satyam Revival – Learnings from the experience' organised here on Friday by the CII Madurai Zone.
First of its kind
“In the last one decade, many financial scams have broken out globally – from the Enron scam to the recent Madoff fraud – as investments are flowing across borders. However, Satyam was first of its kind in India.” The causes could be stock market expectations, nature of accounting rules, internal and external auditing failures or greed, he said.
Before the scandal, Satyam had US $ 2 billion annual revenue, a large talented workforce, presence in 66 countries, listings in the U.S. and other markets besides being the fourth largest IT company in India. Post-January 6, when its erstwhile chairman Ramalinga Raju confessed to fudging accounts by inflating bills and showing non-existent cash balance, the company's stock plummeted to Rs. 6 a share.
While Government-appointed directors' first priority was to restore cash flow, retain customers and motivate employees, the directors also worked towards appointing legal advisors both in U.S. and India and restating accounts through forensic investigation.
They faced a company that had strengths, weaknesses, opportunities and threats (challenges).
He said that while Satyam had challenges and weakness in its tainted image, threat of class action law suits, intense media scrutiny and investigation by several law enforcement agencies, its pluses included large infrastructure, talented work force and low debt. These enabled a turnaround of the company and its subsequent take over.
Speaking about the lessons to be learnt, he said that internal and external audit mechanisms must be strengthened besides implementing an effective whistle blower policy and focussing on the quality and qualification of independent directors.
Ligi George, past chairman, CII Madurai Zone, spoke.