One of India’s largest IT companies, the Hyderabad headquartered Satyam, described as a Global IT company has recently been in the news for the wrong reasons. Some days ago, there was a flap in corporate circles when it was announced that the Chairman, Ramalinga Raju wanted Satyam to invest $ 1.6 billion in two companies (Maytas) owned by his sons.
Crossword aficionados ( or fans , for short) will immediately spot that Maytas is Satyam spelt backwards.
Many felt that this was a compromise on corporate governance as these companies are in the business of infrastructure development, quite different from Satyam’s stated core competence area. The Satyam ADR fell by as much as 56 % in New York as a result of the outcry.
This comes after an event in October with far reaching consequences. Satyam was banned by the World Bank from carrying out off shore development for this prestigious organization due to alleged breaches in security.
More recently questions are being asked about the role of independent directors. Satyam had some very famous names in their Board: Vinod Dham, founder of the Pentium chip; Prof. Krishna Palepu of Harvard and Prof. Ram Mohan Rao, Director of the Indian School of Business. These gentlemen have since resigned but what do all these events say about the role of independent dierectors.
Independent Directors are supposed to safeguard the interests of minority shareholders and ensure high standards of corporate governance. It is reported that companies like Infosys pay Rs. 5-7 million per year to their independent directors. A far cry from an era where they got a paltry Rs. 200 per Board Meeting with the inevitable tea and biscuits.
Wouldn’t it be fair to say that they are paid more since more is expected of them?