By Anu Saha
In the infamy of Satyam, if we were to peer into the looking glass, what would we see? Would it be just a singular (albeit colossal) aberration amongst an otherwise functional system of governance? Or would we see an affliction that is larger than the corporate entity, a systemic disease in the culture at large, of which this incident was only a symptom? And most importantly, would we see a reflection of ourselves? In this debacle, are we equally culpable? Thoughts on what the scandal tells us about attitudes towards government and culture are discussed.
Government: Boardrooms worldwide have a notorious reputation these days; board member negligence is clearly not a problem that is only unique to India. However, certain facets are specific to the Indian context. Governments and businesses do not operate in isolation from one another; the actions of the former invariably influence behavior in the latter and in India, the relationship between the two is particularly dysfunctional. In an environment where public services are acutely inefficient and it is the norm (many times a requirement) to bribe a bureaucrat to get things done, from the menial task of getting a passport renewed, to obtaining a business permit, what has suffered is our collective perception of ethics. If we bypass the system when dealing with government (which, effectively, IS the system), is it not expected that this attitude will trickle down to the private sphere? The proverbial line becomes murky and all magnitudes of malfeasance can be rationalized.
While it is true that Indian financial reporting standards are strict and the market watchdog Securities and Exchange Board of India (SEBI) is truly independent of the government, what has been amiss is the implementation of stringent standards to alter behavior. Particularly, standards and requirements for board accountability and scrutiny, to address issues such as conflicts of interest, board meeting locations, meeting frequency, transparency, and caps on the number of boards that members can simultaneously serve on, need to be enforced. So far, these have been largely lax. Reform has not trickled into the boardroom at the same pace as foreign investment. The result is weak shareholder activism, opaqueness and familial dominance in boardrooms (as was the case with Satyam).
Culture: One incident is pretty telling. In 2001, the Bharat Ratna was awarded to Lata Mangeshkar. A clarification before I proceed. Lata Mangeshkar is clearly very talented, and, arguably, deserves all the accolades of Bollywood that she commands. My exception is not with her, but with the fact that the nation’s highest civil award for the most exemplary degree of service to the nation and the public (previously awarded to leaders such as Nelson Mandela and B.R. Ambedkar) was given that year to a playback singer. The recognition was entirely misplaced.
That year’s award decision symbolized, in my view, the incredulous tendency that seems to persist in our culture to be enthralled with the petty and materialistic. It is an insult to our principles of social responsibility and civic duty when we look to the largely make believe world of Bollywood as our highest source of national pride. It also speaks volumes about our perceptions of one other, how we view those with material wealth and those without, and the virtues and vices we automatically attribute to each group, whether they deserve it or not.
Per the letter of the law, we are equals, but its spirit has suffered, because our society does not accord everyone the requisite respect of equals in daily life. We consistently compartmentalize and treat accordingly. It happens quietly amongst us, through the seemingly mundane, the everyday: when we treat hired labor as servants instead of as keepers of our homes, when we interact with manual labor every day and never wonder whether their children go to school, when the rat race manifests itself on our roads, when 25 percent of Lok Sabha members have criminal records but were still allowed to run for office (and were even elected by their constituents!) These actions pollute our ethical norms and result in a culture of arrogance and impunity that permeates amongst those who have, and those who have very much.
Society interacts with business, and vice versa; the two are interlinked. Corporate culture and ethics are functions of the social setting within which they operate. Perhaps if we held ourselves to higher ethical standards in our personal lives, we would expect and demand the same from one another in the workplace. Perhaps then a whistle-blower would have emerged sooner from within the ranks at Satyam.
So what happens now?
On the issue of governance, the SEBI’s reaction has been largely geared towards restoring foreign investor confidence in the Indian market. The bells for reform are ringing once again, but this is an election year. Even if fortune were to favor a bill in Parliament and it were to pass as legislation, if it is not enforced according to its intent, it will be just another piece of paper. What is needed is more than a swift stroke of legislation, what is needed is policy, which, even in the best circumstances, takes time to formulate and implement. So, chances are that, this year, the repairs will be largely kneejerk – they will be band-aids, just enough to carry us through the election season but not enough to address root causes. It will be interesting to note whether any of the candidates this year will even bother to include governmental reform on the agenda. I, admittedly quite pessimistically, think probably not, though it would be nice to be proven wrong.
These are hard times and everyone is confessing, be it to fraud, or to participating in the binge of credit and risk taking of the last decade. Reactions toward corporate malfeasance in the west have been directed largely towards two groups: the perpetrators themselves and the regulators. However, reactions toward Satyam were directed at much more. Foreign investors and the press have questioned boardroom culture, corporate standards in India overall, the ability of the judicial system to effect reform, and the overall health of corporate governance in all of India’s 9,000 listed companies.
Some of these concerns may be exaggerated – ironically, the SEBI is the one institution that seems to have been given the stamp of approval for its swift action in this scandal. The agency fared better than its equivalent in the States, the SEC, which has been derided for negligence. It is clear that India is measured differently. Whether or not this is right is, to me, irrelevant, because many of the concerns raised by the international community are similar to those that we ourselves have raised before. We may not have been the direct perpetrators of this fraud, but just as the real estate crash revealed the consequences of a collectively relentless pursuit of the American dream, Satyam showed once again that ethics in the private and public spheres of our society are long overdue for reform. We would be amiss to not take note of this.
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