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Satyam fraud leads to demands for tighter governance
By Ashok Sharma |
January 9, 2009, Friday
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Print Edition
Print Edition
INDIAN business leaders are demanding that authorities beef up corporate governance after an accounting scandal engulfed major outsourcing company Satyam Computer, shaking investor confidence.
Infosys Technologies Ltd, another big outsourcing company, said yesterday the fraud was deplorable and that the government and regulators "must investigate and make necessary changes to regulations so that such incidents do not happen in future."
The whereabouts of founder and Chairman B. Ramalinga Raju, who quit on Wednesday after admitting that he had doctored Satyam's books for years, inflating profits, was unclear, said company spokeswoman Archana Uttapa.
Trading on India's stock exchanges was closed yesterday because of a holiday, but on Wednesday, news of the fraud at Satyam Computer Services Ltd dragged down the benchmark Sensex stock index 7.3 percent - with Satyam's shares plummeting nearly 78 percent.
The chief minister of Andhra Pradesh, the south Indian state where Satyam is headquartered, wrote yesterday to Prime Minister Manmohan Singh asking him to appoint a management team that could restore confidence in the company and help protect its employees and investors.
The scandal, though, could ripple far beyond the Satyam offices.
It comes at a delicate time for India's information technology companies, which are struggling against a global slowdown and waning economic growth at home. India's IT firms generate 40 percent of their global revenues from financial services clients.
Fortune 500 clients
Satyam employs 53,000 people - among the 2 million Indians working in the country's booming high-tech industry, which last year brought in an estimated US$40 billion. Satyam's clients include a slew of Fortune 500 companies including Nestle, General Electric and Ford Motors.
Holders of the company's United States-listed shares - which have been halted from trading on the New York Stock Exchange while regulators investigate - have filed two class action suits against Satyam, the law firms representing the investors said in separate statements.
The suits filed by Vianale & Vianale LLP and Izard Noble LLP allege Satyam and its top executives issued false and misleading financial statements and violated federal securities laws, according to the statements on their Websites.
"Much more than the fate of one company and its investors is at stake here, the scandal could taint the entire edifice of outsourcing," the Hindustan Times, one of India's most widely read newspapers, said in an editorial.
"This is a homegrown disaster," said The Indian Express.
A leading business grouping, the Confederation of Indian Industry, has demanded that the loopholes in regulation, accounting, audit and governance that allowed such lapses be urgently addressed.
Amar Ambani, a vice president of brokerage firm India Infoline Financial Ltd, said the manipulation of accounts at Satyam had the potential to severely dampen foreign institutional and direct investment into India.
Infosys Technologies Ltd, another big outsourcing company, said yesterday the fraud was deplorable and that the government and regulators "must investigate and make necessary changes to regulations so that such incidents do not happen in future."
The whereabouts of founder and Chairman B. Ramalinga Raju, who quit on Wednesday after admitting that he had doctored Satyam's books for years, inflating profits, was unclear, said company spokeswoman Archana Uttapa.
Trading on India's stock exchanges was closed yesterday because of a holiday, but on Wednesday, news of the fraud at Satyam Computer Services Ltd dragged down the benchmark Sensex stock index 7.3 percent - with Satyam's shares plummeting nearly 78 percent.
The chief minister of Andhra Pradesh, the south Indian state where Satyam is headquartered, wrote yesterday to Prime Minister Manmohan Singh asking him to appoint a management team that could restore confidence in the company and help protect its employees and investors.
The scandal, though, could ripple far beyond the Satyam offices.
It comes at a delicate time for India's information technology companies, which are struggling against a global slowdown and waning economic growth at home. India's IT firms generate 40 percent of their global revenues from financial services clients.
Fortune 500 clients
Satyam employs 53,000 people - among the 2 million Indians working in the country's booming high-tech industry, which last year brought in an estimated US$40 billion. Satyam's clients include a slew of Fortune 500 companies including Nestle, General Electric and Ford Motors.
Holders of the company's United States-listed shares - which have been halted from trading on the New York Stock Exchange while regulators investigate - have filed two class action suits against Satyam, the law firms representing the investors said in separate statements.
The suits filed by Vianale & Vianale LLP and Izard Noble LLP allege Satyam and its top executives issued false and misleading financial statements and violated federal securities laws, according to the statements on their Websites.
"Much more than the fate of one company and its investors is at stake here, the scandal could taint the entire edifice of outsourcing," the Hindustan Times, one of India's most widely read newspapers, said in an editorial.
"This is a homegrown disaster," said The Indian Express.
A leading business grouping, the Confederation of Indian Industry, has demanded that the loopholes in regulation, accounting, audit and governance that allowed such lapses be urgently addressed.
Amar Ambani, a vice president of brokerage firm India Infoline Financial Ltd, said the manipulation of accounts at Satyam had the potential to severely dampen foreign institutional and direct investment into India.
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