Is the Satyam incident likely to be viewed as a blot on the entire Indian corporate community? - Neeraj Kumar, PGDM-Ist Year, IIM Calcutta

"The Satyam episode is a blot on our corporate image,” said Prime Minister Manmohan Singh at the recently held ET Awards. No, this is not an answer to the question that has been raised here, rather perhaps the trigger behind the question. Is it really so? Let us probe a little deep to get better insights into this debate and possible conclusions, if any.

The last two months have given Corporate India its worst shock in history. A fresh scam in a not-so-fresh manner has raised questions over the prevailing standards of Corporate Governance and its monitoring in India. And so have arisen many comparisons – a Satyam Vs. Enron, PWC Vs. A.C. Nielson and Ramalinga Raju Vs. Kenneth Lay. Thus come up the arguments that scams keep happening and are no threats to India Inc., just as an Enron could not do anything to brand USA as a whole. But is it really that simple? The action of World Bank against Wipro and four others is a sign of the potential collateral damage that the Satyam episode can cast on India Inc.

There cannot be a clear Yes or No verdict on the situation. To find what may realistically happen, we need to check what has changed since the Satyam episode was revealed. So let’s go back and look into the statement that we referred to at the very beginning of this discussion. "Satyam episode is a blot on our corporate image” – the Prime Minister of India made this statement at the ET awards attended by over 300 CEOs. But could it just be a signal to corporate India, rather than a definite conclusion?

It is extremely important at this juncture that a strong signal be sent by way of action against the guilty. The Government should ensure quicker and transparent treatment of this entire issue to set examples for the corporate world. This would also convey a sense of justice having prevailed to domestic and foreign shareholders in Satyam.

It’s also time that regulators in India did something to ensure the non-recurrence of such scams in future. The corporate governance norms in India are said to be at par with those in the developed world. What we lack is the proper implementation of those norms. The monitoring should be customized to suit Indian conditions especially in case of family owned/promoted companies. Interestingly, Satyam was awarded the Golden Peacock Award for Corporate Governance in 2008 (that was later stripped off). Evidently, we need to revisit the basics and look at the gaps. Decisive and prompt action, wherever required, will create trust in the system and drive home the point that Satyam was just an aberration.

It has to be mentioned that the Indian Government has done a fairly good job in replacing the Directors and Management in Satyam within a short span of 3 weeks. Appointment of fresh board and management has sent out positive signals to customers and share holders. And the fast action has already started to pay off in the form of inflow of new deals.

Scams are common everywhere and not as harmful as they might initially seem to be. However, unless managed with due diligence, a scam of this scale can easily be blown out of proportion in discourse and tagged as a stigma to the whole of India Inc.