January 11, 2009 4:00:08 am
Iam in the process of launching a weekly magazine. The dummy issue is printed and ready to be sent to potential advertisers and for feedback from likely readers. We in the office all agree that we couldnt have chosen a more logical time to launch a media company,given the expected fall in GDP growth rates,the cuts in advertising spends,and all the strident breast-beating about the definitive end to all good times for all foreseeable future. So one of my colleagues had a suggestion on how to market our magazine. It was a powerful idea.
Get PricewaterhouseCoopers,he said,as our auditors. Get them to certify a circulation of 7,00,000 copies by the end of the first quarter,then get them to introduce us to all the advertisers who are PwC clients. This is a failsafe strategy. We are currently just working out what a good circulation would be: 5,00,000? 7,00,000? Would a number like a million be less credible than we would ideally want?
OK,lots of other people more knowledgeable than me have said it,but let me just add my $0.02,no different from the other commentators $5. What PwC has done is an utter disgrace. Maybe it was one senior partner of PwC who is responsible,and no one else knew. Yet,the firm must take responsibility for this criminal act ranging over seven years. I remember an editorial meeting at The Financial Express a year ago,with all of us wondering how Satyams quarterly results were so much better than those of TCS,Wipro and Infosys. It seemed to be the best-managed software company in India,and we wondered if we should do an in-depth analysis of what Satyam was doing so right. We didnt,finally. The moment passed,thank God it did.
There was no way that Ramalinga Raju or PwC could have got away with the fraud. As Raju mentioned perceptively in his letter to his board,he was riding a tiger and couldnt get off. When he did helplessly clamber off,the tiger turned and ate him. As has happened to so many of our hotshots: from Rajendra Sethia to Harshad Mehta to Ketan Parekh. But men like Raju never learn.
The gall of the man. To say in his letter that he has not made a single rupee out of the fraud he perpetrated. He fixed balance sheets to show earnings 10 times the real figures to inflate stock prices,systematically sold off most of his holding in the company at a huge profit,and he didnt make a single rupee? The truth is that he gambled his ill-gotten gains on real estate with advance knowledge from successive Andhra governments about where prices were likely to soar. Then sub-prime hit the fan. Land prices tanked and Mr Raju found that actually he had raped Satyam so brutally to pursue his greed that the company didnt have the cash anymore to run operations beyond a month. It was not his conscience that forced him to admit his crimes. He would have been exposed in another day or two anyway,so he did the smart thing: he confessed,expressing deep regretHansie Cronje 2.0.
But its not only Raju and PwC who are suddenly naked in public. The independent directors on the Satyam board were a stellar lot. Think of Krishna Palepu,the Harvard professor acclaimed as the worlds greatest expert in corporate governance. His official CV states that in the area of corporate governance,Professor Palepus work focuses on how to make corporate boards more effective,and on improving corporate disclosure. Among the executive programmes he teaches is Audit Committees in a New Era of Governance. He also co-led Harvards Corporate Governance,Leadership,and Values initiative,launched in response to the recent wave of corporate scandals and governance failures.
A friend of mine wrote to Palepu. Evidently, he wrote,you are guiding US-based global corporations in such matters. However,in your home country,you are helping organisations like Satyam steal shareholders money. My question is simpledoes this make you a traitorous hypocrite,or merely a greedy criminal? Im inclined to the latter,but as an eminent Harvard professor,perhaps you can guide me on the correct terminology? Look forward to your response.
Guess what? Palepu has not replied. Greedy criminal,I would think.
Sandipan Deb is the editor of RPG Enterprises soon-to-be launched weekly features and current affairs magazine.