By Raman Jokhakar, Tarunkumar Singhal, Chartered Accountants
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45 How many bad eggs ?
The terrorist attacks on Mumbai in November and in past years
have showed up the weaknesses of India’s internal security system, but also laid
bare the fact that security failures are linked inextricably to broader issues
of governance and corruption (policemen who allow smuggling of commercial
contraband also allow RDX to come in). In the same way, the Satyam scandal
points to the dirty underbelly of India’s corporate world, and of its regulatory
and legal framework. The fact is that Satyam would not have happened without the
failure of the company’s independent directors, auditors and bankers, not to
mention senior executives not linked to the guilty promoters. Such broad-based
failures do not come together by accident; they have to be pointers to broader,
systemic failures.
In the Satyam case itself, the valuation of one of the Maytas
firms for purposes of the aborted merger was done by a leading accounting firm
on the promise of secrecy — an unheard of procedure that the independent
directors accepted without demur. Evidence of broader systemic problems has also
surfaced, with news reports pointing to the pathetic record so far of the
Serious Fraud Investigation Office (virtually no convictions till date) and of
the Institute of Chartered Accounts of India (which has a poor record of
penalising guilty accountants, and has not yet taken action in the auditing case
involving Global Trust Bank, despite the lapse of four years).
Everyone knows that business is not a morality play. There
are always good and bad eggs. The question is, what is the mixture, and is it
palatable ? When the World Bank is pointing fingers at even marquee corporate
names, does anyone recall that Transparency International polled international
businessmen to come up with the finding that Indian businessmen are the No. 1
bribe-payers abroad ?
We can respond to a scandal by brushing uncomfortable
questions under the carpet, and hope that business can go on as usual. But that
would be the worst possible way to deal with the problem. If we want to clean up
rather than simply wait for the next scandal to erupt, we had better start
looking for systemic correctives.
(Source : Business Standard, 17-1-2009)
