Lessons from Satyam

To start with, Satyam fiasco teaches everyone a lesson ,the hard way.
No one should resort to any kind of malpractices at any stage in his career.It keeps multiplying and eventually if not tomorrow ,the day after, truth will come out and that point the disclosure will bring more embarassment and shame.

Corporate Lesson:

1. The current regulatory dispensation focuses strongly, on what goes into making an independent director, but makes little effort to assess whether that person continues to remain independent, once he is on the board.

2. If, Satyam had to pay only a tenth of the price recommended by the promoters, to buy the two Maytas companies, one could make a cogent case, that, despite there being no obvious synergy between the two businesses, the shareholders would have benefited from a good opportunistic investment, at an attractive price.When faced with such grey situations, the appearance of opacity or inadequate due diligence can be avoided if shareholders had some way, to infer that directors have fulfilled their fiduciary duties.

3. As a fiduciary, independent directors should have the opportunity to meet with institutional investors to understand their views. How, after all does a director satisfy the demands of his role if he is unaware of the views of his shareholders? Although current regulations, correctly, would not permit the sharing of information between directors and select groups of shareholders, it does not, as far as I know, prevent shareholders from meeting directors and expressing their views on the company's strategy.

4. Shareholders on their part, have a right to know how their directors represent them.Details of dissenting views, in a board can convey useful information about the various options considered at a meeting.This would impose pressure on independent directors to be seen to be fulfilling their duty of loyalty rather than empathising with the top management.

5. It is not difficult for the regulators to bring the sunlight of transparency to board discussions, through a few changes in their disclosure guidelines as I have suggested above.

The possile solution: Hostile takeover.

1. I still see Satyam as a company that did business all these years amounting in at least 5000 crores if not more considering the number of Fortune 500 clients that they engaged with. Satyam's network covers 67 countries across six continents. The company employs 53,000 IT professionals across development centers in India, the United States, the United Kingdom, the United Arab Emirates, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia. It serves over 654 global companies, 185 of which are Fortune 500 corporations.

2. Given the above, I would prefer a big corporate house like Reliance or Birla which has good solid credibility behind it and which has little or no presence in the IT sector to take over Satyam and assure its customers and investors that they would clean up this mess soon and bring it back to where it was a few years ago. Satyam would be an excellent buy for the above considering its current market share price.

3. Now, this would help a customer who has signed a 7 year ERP/SAP deal with Satyam and is now halfway through it. The present fiasco would amount to huge losses to such customers. They would rather prefer the above so that their investors/shareholders are assured , the deal is re-negotiated and the project continues without much delay and could be completed in the timeframe.

4. Satyam is a also a good buy for offshore companies like Bearing Point PLC which do not have a ODC in India. India, being a booming market, with a legacy of good corporate governance, it makes more business sense for such offshore companies to set up a base here. Buying Satyam would make even more business sense given the clout of Satyam.