Wednesday, February 25, 2009

from, business as usual, to trusteeship

I have a strong hunch that Satyam and the Satyams-in-waiting are a direct outcome of accountants & auditors getting bored. Nowadays every job out there has creativity, including that of lawyers & bureaucrats. But creativity has been sorely missing from the accounting field. How long can the CAs put up with dreary number-crunching and tallying? Poor things, they were forced to invent ‘creative accounting’.

Now all that remains to be done is officially acknowledging this creativity. Maybe institute an award for it too, much like the Cannes Lions. India Inc’s top-three will retain their slots in this segment too. What is the big problem with such thinking-big? As long as such awards help in inflating the share prices further, what is the big problem? America must have broken its back by designating share-prices as its national value system, but it needn’t be the same with us. As the bigwigs at FinMin love to say, aren’t we more resilient?

Anyway, what if Raju hadn’t been caught?

Satyam would have posted their next quarterly results. Announced a couple of probable acquisitions halfway across the globe, and announced some repeat orders. Half of the analysts would have posted a BUY on Satyam shares hoping to make some money, and half of the analysts would have posted a SELL on the scrip hoping to make some money, the other way round.

Business as usual.

Some Satyamites would have jumped to Infosys & Wipro thinking they are better companies, and some Infoscions & Wiproites would have jumped to Satyam thinking it is the better company. Business as usual.

Chartered Accountants of India would have continued to wax eloquent on their superior auditing standards vis-à-vis US, and our Finance Ministry would have continued to proclaim India’s superior controls vis-à-vis the rest of the world. Business as usual.

The 40 odd public, private, & MNC banks that fuelled Raju’s empire would have slept cosily reflecting on the lucrative-ness of big, ‘mutually-beneficial’ businesses, and how foolish it would have been to divert those funds to struggling entrepreneurs, farmers, or students. Business as usual.

The Big-Four of Accounting - PricewaterhouseCoopers, Deloitte, Ernst & Young, & KPMG - would have continued to behave as though they have nothing in common with their former compatriot Arthur Andersen, whom Enron took for company while sinking. Business as usual.

The power-centres from Srinagar to Thiruvanathapuram, and New Delhi, would have continued to shower tens-of-thousands-of-crore worth projects on Maytas, because, as per their corporate motto, they are ‘simply reliable’, not only for TDP, Congress, & BJP, but even for the holier-than-thou Left Front. Business as usual.

Raju’s Emergency Management & Research Institute (EMRI) would have continued to deliver exceptional Corporate Social Responsibility (CSR), purely on government funds. Business as usual.

Raju would have even landed his next round of corporate awards from leading business dailies and business channels. Business as usual, even in the fourth-estate.

But sadly, Raju was caught. Business will be slightly different than usual for him, and grossly different than usual for the millions of shareholders, associates, & employees he cheated. However, they are just a miniscule percentage of the great nation we are.

But what about the rest of India Inc? The numerous Satyams out there in sheep’s clothing? For them, it is business as usual, as usual can be.

No, let us desist from speaking ill about some petroleum giants, liquor barons, mobile monsters, and real estate behemoths. Disgracing them is a disgrace to us. Because, they make no bones about their integrity.

But what about those respectable businesses out there? Those much-vaunted benchmarks in business integrity and transparency? Viewing them realistically is critical at this juncture because of a simple thing. Investors, banks, administrations, as well as media, need somebody in India Inc to look upon as benchmarks in integrity. We have an innate need to enthrone a couple of Mr. Squeaky Cleans. And the whole market can get carried away in dangerous exuberance.

So, just to put things in perspective with these benchmark companies, here are a couple of titbits from their histories.

Close your eyes and imagine India’s most transparent software company. Its celebrated chief founder has dazzled investors and media in the past by statements like, “I never check my share price even during bull-runs”. But in case you didn’t know, its early history has a not-so-transparent chapter, in which it blatantly reneged on a long-term software co-development and marketing agreement with one of its first clients – a major PSU bank – after gathering precious domain intelligence from them, at their expense! Was it cheating or was it ‘visionary thinking’? That time it used to be called cheating, but since they became the benchmark in transparency, it has been hailed as leadership. We leave it to you to decide – but be aware – cheating or ‘leadership’, it is in their DNA.

Now close your eyes and imagine India’s most venerable, most diversified, and most transparent conglomerate. Its scion has also dazzled media in the past with statements like, “We never bribe anybody, however difficult the situation might be”. But their past and recent history shows something quite different – they have amassed billions by cultivating on encroached government land for centuries, and during the PSU disinvestment process, they asked for and got what they asked for at what they asked for – one of the most profitable telcos for peanuts. Are these case studies in big-ticket-bribing or a genie granting them all their wishes? Whatever it is – be aware - it is in their DNA.

The point I make is simple. If a poisonous snake was found in your neighbourhood, chances are that there are more snakes around. If a Satyam was found, there will be more Satyams around. If a PwC was found, there will be more PwCs around.

There is also another way to put this. There are more killers, rapists, & cheats in the society than behind bars. So if we mock Raju & PwC, let us mock them for getting caught, and not for why they are behind bars.

After all, he was so smart. Didn’t he evade capture right from his first business? 25 years back, before ‘Raju Ban Gaya Gentleman’, he had duped Andhra Pradesh Industrial Development Corporation (APIDC) for Rs. 52 lakhs – a princely sum in 1983, and most probably the only capital of his subsequent empire. But what should pain him, and those who love him still, is that he was so ungrateful – even after he became a multibillionaire he didn’t show the grace to repay that 52 lakhs of taxpayer money.

Incidentally, Raju & PwC has done a great service to the investor community – they proved once and for all, what a publicly traded company’s ledgers are worth. We need to thank them for it.

The disease is not skin deep. It is systemic and it is called Capitalism. Once it was a medicine to kill an even deadlier disease – Communism. But now, it is The Disease. Marx had so eloquently explained how capitalists will multiply their tiny original capital to unprecedented heights, solely on the surplus labour of their workforce. The only practical solution, however, seems to be Gandhi’s Trusteeship Model. The Father of this Nation had so elegantly mixed entrepreneurship, Marx’s surplus labour theory, and his own social responsibility framework to reach at Trusteeship, which he termed as the “only way business can be done with morals.”

One day, world will turn to it. Inevitably. It has to. There is no other way.

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