SATYAM AND SHAREHOLDERS' ACTIVISM

"Integrity is doing the right thing, even if nobody is watching." – Unknown.

Satyam Computer Services Ltd’s proposed plan to pick up 51% in Maytas Infra and 100% in Maytas Properties and subsequent backtracking has created many doubts especially on corporate governance and business ethics. It is a fall from grace. The move has weakened the IT sector further. It is like adding insult to the injury. It has come as a shock at a time when IT is struggling and recession is ruling the globe. Indian business leaders would be under scrutiny hereafter globally.

The scrip received drubbing at the bourses. The decision drove the shares down 55%.
The promoters’ holding in the company is 8.6 per cent. It is a way of the minority imposing their will on the majority of investors.

Analysts questioned the deal from strategic perspective while the critics questioned from corporate governance perspective. It is, precisely, compromising both business ethics and corporate governance. The damage cannot be undone that easily.

Now a days, the investors have become more cautious and mature and the management should not take them for granted. The management or board of directors should have taken more precautions and lot of home work before taking such decisions.

It is not clear what is there at the back of mind of Raju but the decision to buy led to doubts among the investors as both the companies belong to his family members.
When we look at from the long term perspective, real estate and infrastructure would have longevity as IT can not be taken from the same perspective. The bubble may burst at any time. The technology is also changing rapidly.

The Satyam solely depends on the US clients where recession is taking its toll. May be, to minimize the risk he tried to diversify into IT and Infrastructure which are growth areas. Considering from the experience of Raju, he is a visionary and a master strategist. It can not be denied altogether that keeping the interests of the employees and shareholders he might have taken the decision. But again involvement of family members created a doubt.

There is a huge potential for Real estate and Infrastructure sectors. Of course, there is a temporary glut in these sectors as well. But when observed from long term perspective these sectors are ever green.

Satyam bagged Golden Peacock Award for corporate governance in this year. How did it take such decision which questions the credibility and integrity is a debatable issue in the present scenario.

It is improper to do it because of the involvement of the family members- Raju’s sons. It involves corporate governance and interests of investors. Raju can no longer be called as an ethical leader. He owes an explanation for this, especially to the shareholders, employees and associates.

No company can survive without the support of customers, employees and investors. When any one of these three elements is weakened the organization would collapse. No amount of fire fighting can heal the wounds of the investors.

Raju is now trying to buy back the credibility by agreeing to buy back the shares. It would help the shareholders by way of returning their capital. It is a desperate attempt to pacify the angry investors.

One blessing in disguise in this episode is the victory of shareholders over the management. Shareholders have expressed their anger and have united for the first time thus leading to shareholders’ activism. Shareholders’ activism is to be appreciated. This is a clear cut message for other business leaders to take their valued investors into confidence. And also shareholders’ activism is a right move catching up in India to check corporate governance practices, if any.

Indian business leaders should keep their family interests away. Investors’ interests are more important than family interests. To conclude the management should take such major decisions only after taking the consent of all shareholders. Mere taking the consent of the board members will not suffice.

“The biggest corporation, like the humblest private citizen, must be held to strict compliance with the will of the people.” Theodore Roosevelt, 1900.


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