It was on this day that chairman B Ramalinga Raju of Satyam Computer Services, considered to be one of the torchbearers of India's new economy, confessed to a corporate fraud amounting to Rs 7,800 crore (Rs 78 billion).
In a letter to the board, confessing his misdeed, Raju said: "Every attempt to eliminate the (balance sheet) gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten."
While the existing board was subsequently dissolved, and Raju and his brother Rama Raju, and the company's chief financial officer Srinivas Vadlamani were remanded to judicial custody till January 23, the future of 53,000 employees remains in limbo.
The government on January 11 formed a new board with HDFC chairman Deepak Parekh, former president of Nasscom Kiran Karnik and former Sebi member C Achuthan as the members.
How badly will the Satyam fiasco dent the image of other IT companies in India? Will the new board be able to steer Satyam in the right direction, and stabilise the future of its staff? Will it be able to infuse confidence into the minds of thousands of Satyam investors?
In an e-mail interview with Assistant Managing Editor Indrani Roy Mitra, chairman of National Association of Software and Service Companies, Ganesh Natarajan, discusses these issues. Read on. . .
How do you think will the Satyam fiasco affect the Indian IT industry? Will clients, investors shy away from Indian IT firms? Will FDI coming into India fall?
The Satyam fiasco has indeed raised serious concerns in India but the quick action of the government and the appointment of a very credible board of directors will bring back some of the lost confidence of the stakeholders -- employees, customers and shareholders.
More questions will no doubt be asked in the coming days but bold steps by the board would ensure there is no permanent blotch on corporate India's image.
How does this incident affect corporate India and India as a country?
Any adverse development has an impact on corporate India and India as a country. It is imperative that the board's actions in the next few days restore the confidence.
Is there a need to have tougher corporate governance norms?
I would not call for any knee jerk actions now as that would increase the load and lower the efficiency of companies without solving the underlying problems.
A thorough analysis of the reasons for the Satyam breakdown should be done, following which corrective action about the system of reporting and corporate governance can be initiated.
That would apply not just for Satyam but for all companies.
What about the role of auditors? How could PwC be conned for so long without becoming aware of the wrongdoings?
It is difficult to point fingers at this stage without the investigation having been completed.
All guilty parties can and will be punished once the wrongdoers are identified.
What do you feel needs to be done to stop recurrence of such frauds? What can the regulatory bodies like Sebi, government etc do?
The regulatory bodies need to identify and eliminate the root causes and ensure that any loopholes exploited by the promoter in this case are plugged for good.
How far will the world accept that this is just an isolated, one-off case?
We have done enough communications and will continue to do so with all key stakeholders to reinforce their confidence in us.
Such incidents are not uncommon -- Worldcom and Enron being much publicised cases in the Western world.
While a fall is unfortunate, it is the speed with which we pull ourselves up and continue to move ahead is critical.
The quick actions taken and the impeccable reputation of the industry over many years will reinforce the faith of the world in us.
Is there something that the Nasscom and the IT industry can do to minimise the damage and to see to it that the Indian industry continues to flourish?
We have already taken steps to ask companies to be even more transparent and offer full disclosures.
We have requested firms to desist from proactive approaches to customers or employees to lure them away.
Apart from this, we are standing by the Satyam board and the government to support them in their arduous tasks in the days ahead.
How can India now soothe the frayed nerves of investors, clients?
India has to take robust action against the wrongdoers and it has to ensure business continuity.
What kind of punishment do you think should be meted out for such a fraud?
The laws of the land will decide on this.
But the punishment should surely be strict enough to serve as a deterrent for all potential offenders.
What lessons need to be learnt from this fiasco? What is the silver lining in this dark cloud of affairs?
At this stage, there is no silver lining and the lesson to be learnt is that we should always be watchful for any frauds in our system and any wrongdoing within our companies.
Do you feel that we need different set of values to judge corporate leaders rather than just the amount of money they have?
Of course, money is hardly a measure of integrity. All corporate leaders must be measured by their ethics and values, in addition to the standards of corporate goals they achieve.
Do you think Satyam is a good acquisition possibility? Would any IT company be interested in buying out Satyam, especially to help save the 53,000 employees from joblessness?
I think any potential acquirer will want to see a clean set of accounts. That indeed would be the first step.
With Kiran Karnik, Deepak Parekh and C Achuthan as the new board members, do you think Satyam is in capable hands? Will the new board be able to steer it out of the crisis?
The new Satyam board has extremely capable hands, but the eminent gentlemen will need all the support to keep the business of Satyam solvent and running!
World Bank bars Wipro, Megasoft, 3 more firms -- does it mean the global powers are losing faith in Indian IT? After the Satyam debacle, will this ban from World Bank tarnish the image of the Indian IT further?
The World Bank ban is unfortunate, but is not a recent development though the disclosure was done on January 12. The ban does not indicate a loss of faith. But it is a clear wake up call for companies to be transparent in disclosures so that they continue to earn the faith of all stakeholders.
What could be done to ease the frayed nerves of Satyam's 53,000-odd employees?
There should be a clear direction from the board about the actions they propose to take to ensure continuity.
I am sure that will happen very soon since the board's first meeting has already identified liquidity as a top priority.
Photograph: Nasscom chairman Ganesh Natarajan. | Photograph: Rediff Archives