Another day, another story of corporate malfeasance. The cycle continues as shareholders look to “others” to manage their business. Good Luck!
Here is a story from the motherland that will make you stand up and take notice. Satyam – means “truth” in Sanskrit/Hindi – has been a big lie! The founder of the Indian software/consulting/outsourcing giant has just relinquished his management position admitting to widespread financial fraud – he had been cooking the books for a long time.
How could he go on reporting non-existent assets worth $1B on his balance sheet?
“What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew,” explains Mr. Raju. “It was like riding a tiger, not knowing how to get off without being eaten.”
“Failure of governance,” opines Mr. N R Narayan Murthy, founder and Chairman emeritus of Infosys. But what does he know.
I like Bush’s explanation better – “the asset mistake just happened. I am sure Raju is not happy about it but what could the poor guy do?” Just kidding! President Bush is too busy setting strategy for the oval office rug and buying $500,000 china a week before he leaves the white house.
So, after the customary hand wringing and expression of dismay and disgust – after all this is only the millionth time something like this has “just happened” – let us assign blame. Who is to blame?
Mr. Raju is at the center of it and admits his role. Where is the government? Where is the accounting firm (PricewaterhouseCoopers, which has audited the company since its NYSE listing in 2001, said it was “examining” Mr. Raju’s statement and could not comment further!)? Where is the CFO? Where is the board? Where has it been? Who was on the board and how did they get on it?
My favorite, as always: Where are the shareholders? Where have they been?
The lynch-pin of corporate governance is the same as one for corporate performance – greed. Yes, that thing that got you in the stock should drive you to protect your investment. Where should you look for corporate governance? Look within.
