Are the Rajus the only culprits in the Satyam episode?
S. RAMANATHAN
The Satyam saga has brought to the fore the ugly face of the IT industry and enough stones have been thrown on its founders. Why did the Satyam saga happen in the first place? The stock market, the media and the public, including the political class, all are to be blamed for Mr. Raju’s greed.
While the logic of this reasoning is unassailable, the question remains whether it is the only reason or, to put it the other way, was Mr. Raju alone greedy? What about all those investors who, in their greed to make quick money, got into short term trading? Leave alone professional investors, retail investors, including housewives, were attracted by the quick money of the stock market and got into intra-day trading. Satyam was one of their favourite stocks and the company too has been unfailing in fulfilling the appetite of these investors till one day when the promoter decided to confess and the stock crashed.
Near universal greed
In fact, even on that day when the stock was having a free fall, there were many small investors who were asking whether it was the right time to buy the Satyam stock at the rock bottom price. What if the company’s fundamentals are shaky, somebody will bail it out and we will make our money. The Rajus represent a larger dimension of this near-universal greed. Remaining the darling of the investment community is not without price. Companies, forced to show consistent performance of improved cash flow quarter after quarter, do not take a long term view of returns, and strategic investments such as in R & D take a backseat.
Mr. Narayana Murthy used to say that in the early days of Infosys, they saw to it that the company remained in the limelight by doing something “sexy”. He meant it in the positive sense and Infosys was a pioneer in many innovations such as ESOP and human resource accounting. Not every company can be as innovative and Satyam had taken the easier route of sexing up the financial statements.
In a competitive environment, when performance is demanded in short time cycles, we would be naïve to believe that Satyam was alone in this misadventure. Either the others are keeping such manipulations within manageable limits, or the full story is still not out.
Investment advisers
It brings us to the next lot of people, who are answerable to the public: the investment advisers and fund managers. In the post-confession scenario, only one fund manager came out openly saying that he had always advised investors against this stock. It might be argued that how investment advisers could act otherwise, when the financial statements were rosy or more precisely were made to look so. But if research and analysis have any meaning, they need to go much beyond analysing financial statements available to the public.
The stock analysts could also argue with much more impunity that the stock would have continued to perform well in the market but for its Maytas misadventure; what if the company’s practices themselves are questionable. So what, as far as the investors are benefited? This “self-interest above all” attitude is what justifies and perpetuates corporate frauds.
When Satyam acquired a portal at a whooping Rs. 499 crores, the investment community, which is now demanding the blood of Mr. Raju, was all gaga over the mega acquisition. Satyam stocks continued to soar after the acquisition. No question was raised about the long-term sustainability of such decisions. The fraud and its magnitude came into the open not because of any investigation, but because Mr. Raju, whatever his compulsions, decided to confess.
Mr. Raju is responsible for this scam. But do we realise that Mr. Raju is not the cause, but the result of a much larger social malaise of greed for making quick money?
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