Wednesday, January 07, 2009


There is news about Satyam everywhere. The company has gone against its name (Satyam means Truth) and lied in its financial reports with bloated numbers. It is weird to note that Satyam won the golden peacock award for corporate governance in 2008! That puts a big question mark on the process of deciding the award winners.

Satyam has been in the news in recent times for all the wrong reasons. First it was the bribery case with World Bank and then the controversial attempt to take stake in the Maytas (The reverse of Satyam!) companies. I was personally shocked when I heard the news of the bribery case. Now the financial misreporting is something beyond my wildest imagination. I might have been less shocked if this were with an oil or energy firm. But IT? Geez!

Most media report on the attempted Maytas acquisition as a means to move money to the Raju family. But I seriously doubt it. Since Satyam had a huge deficit between reported earnings and the actual earnings, may be they were trying to correct the records with an acquisition. Something like buying stake in the company and transferring money only on the records. This would have accounted for the deficit in Satyam's records. Does this help the Raju family? Nope. The Raju family has only a 10% stake in Satyam while they have 100% and 40% stake in the Maytas companies. So if this was supposed to be a way to correct Satyam's records, then the family actually loses money in the process. I hate to disagree with the media, but my point of view seems to make logical sense.

All the focus is now on Satyam. But I would like to see the effect of this on PricewaterhouseCoopers. It is tough to believe that a scandal of such scale managed to avoid the eyes of the accounting firm. When Enron collapsed in a somewhat similar situation, Arthur Andersen went down with it. What is going to be the verdict on PWC?


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