Satyam Board Dissolved, Peer Review Audit Of Nifty Stocks Ordered
January, 10th 2009
The implosion of a good company gathered pace today when the Indian government announced the dissolution of the rump board that existed following the resignations of the independent directors and the Chairman and Managing Director of Satyam Computers. Acting through the Company Law Board, the government effectively nationalized the company and announced it would constitute a new 10-member board of independent directors within seven days consisting of "people of repute and dignity". Soon after, ex-Chairman Ramlinga Raju surrendered before the Andhra Pradesh police, after being untraceable for two days.
The material losses that appear to have been sustained by shareholders and the doubt over the accuracy of the auditing performed by Pricewaterhouse Coopers moved the SEBI chairman to announce that they would be asking all Nifty companies and other selected ones to submit their working books to a different auditor for a peer review. This unprecendented step might expose additional skeletons in the closet of various companies, but will go a long way in demonstrating the assertiveness and efficacy of India's regulators and government bodies.
Continuing with its penchant for rumor and provocative news reportage, the mainstream media floated a report today about Satyam announcing a two month hiatus of pay for its employees. This was rapidly debunked by employees, who indicated this was a misrepresentation of an internal employee discussion about sacrificing some pay, up to two months worth, to save the company they had built together.
Additional ambiguity was sought to be created in the misreading of the Infosys announcement that it would not poach employees or clients from the beleaguered Satyam into a statement that the employees were somehow un-employable.
The Indian government is dealing with a welter of issues all at once, and appears to be rising to the challenge, ending the petroleum officers' strike, besides superceding the Satyam board. This new economic order, with an assertive government acting fast and a big broom sweeping clean the excesses of the past, is a refreshing change, and might see an uptick in world perception about India's lethargic State.
The world economic situation continued to worsen, with United States job losses rising to 524,000, with an annualized drop of 7.2%, the highest since the end of World War II.
As the year progresses, it is already evident that this will be a year of many surprises, and things will only get darker before any glimmer of hope is seen. The rejuvenated expansion of the State might help stem the rising tide of economic fear, but this might come at the cost of free markets, which have their own way of working things out.