dec 19th, 2008
i think this sort of thing happens in indian companies all the time, as they are controlled by the original entrepreneurs with only a small stake. the other directors go along with what the entrepreneurs want. what do you think reliance and even tata does?
satyam's error was doing this in a visible manner. if they had been advised better by their investment bankers, they could have hidden this in a thicket of cross-holdings, and nobody would have been the wiser.
it is especially entertaining to see anglo-americans getting all steamed up about 'corporate governance' and all that. where was your 'corporate governance' when enron did its thing? when goldman sachs et al created the biggest ponzi scheme in history, ie the sub-prime crisis? when madoff was cleaning you all out?
let us not get all sanctimonious on satyam and dump all over them. i think they made two poor decisions: one, maytas's winning bid for the hyderabad metro was too low, so they are strapped for cash and are finding it difficult to raise funds in the illiquid market. two, satyam, instead of routing funds to maytas through murky offshore transactions and p chidambaram's favorite, p-notes, did the straightforward thing.
i feel bad for the rajus. they are good people, and were poorly served by their M&A lawyers and PR people and investment bankers. these people should have suggested the kind of shady deals i touched upon above.
3 comments:
Rajeev, these guys were bailing out the other family businesses from the fall in the real estate market. As such, they were soaking their investors, who rightly abandoned them. Trying to compare oneself to the likes of Enron, WorldCom, etc is not a good standard to set -- that's more like Race to the Bottom. Whether someone tries to mug you in the shadows or tries to mug you in broad daylight, they're still mugging you.
I think a change in the rules of governance at Satyam would be beneficial.
Rajeev, you are right. the rajus and the ramoji rao (eenadu group of newspapers and priya pickles brand) are all self made people. it is their companies to begin with and now all that 'corp governance' etc is real preaching by others who dont practice, by all means Maytas is trying to bring in corp and white money into real estate. i have been to maytas and they only accept 'white' if their flat is 80 lacs it is registerd as 80 lacs. we need more people like rajus and ramoji rao's they are any day better than a Colgate, or west or UAE owned firms, they are local to the core and do a service to the community where they come from (see rajus 108 emergency service in AP..etc) and of course Ramoji Rao's paper catching the Samuel Reddy when needed. Yes Rajiv, we are in Kala Yuga, what Rajus did is absolutely right...unfortunately they had to back off... too bad
I have heard about that all white real estate dealings as well. It was a shock to people. But its good, and hope everyone starts to follow that.
Here is an article on NYTimes about the financial mess in the US and Indian view. He is rightly asking, you guys had Enron, and passed Sarbanes Oxley etc, even then how can such thing happen. I remember when we were implementing sarbanes oxley in our Corp, we were forced to introduce controls on a simple purchase order, where the guy's total authority was less than 50K. I think we let big fish go for a small fish. Pity.
http://www.nytimes.com/2008/12/20/business/20nocera.html?_r=1&8dpc
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