- Image by World Economic Forum via Flickr
There’s an old saying: ‘where there’s a will, there’s a way’ and that is certainly true in India.
Earlier today, the Indian government stepped into the troubled company and disbanded the entire board of directors. Here is the government press release as reported in The Economic Times:
Following is the text of the statement given by Corporate Affairs Minister Prem Chand Gupta on disbanding the board of crisis ridden Satyam Computer Services:-
You have been witnessing the developments in Satyam case for last few days.
To be brief and precise, let me share with you that the Government is deeply concerned and determined to take all possible action under the law to bring to book at the earliest all those persons who are responsible to betray the faith of lakhs [thousands] of shareholders, thousands of employees, esteemed customers within and outside the country and various other stakeholders.
The greed and misdeeds of a few persons who were at the helm of affairs of the company could have caused the present unfortunate situation. We are determined to reach the truth but are equally concerned with the fate of employees and other stakeholders.
You are already aware of the prompt, effective and co- ordinated regulatory action being taken by the ministry. Officers of this ministry along with officers of SEBI at Hyderabad have already taken various actions. These include siezure of documents of the company after obtaining orders from judicial magistrate at Hyderabad, a team of officers of the Ministry of Corporate Affairs have already started inspection of eight group companies and co-ordination with the authorities of the State government of Andhra Pradesh.
Action against auditors of the company has already been initiated by the ICAI, the developments so far indicate that the current board of Satyam has failed to do what they were supposed to do.
As I have already said before, Satyam case is an aberration. The credibility of Indian corporate sector in general and IT sector in particular should not be allowed to suffer because of this. It is the prime concern of the government to ensure that the operations of the company continue uninterrupted and in that view, the government decided to approach the company law board who on the petition of the government has allowed the following interim prayers-:
1) To restrain the current directors of Satyam from acting as its directors.
2) To allow the Central government to appoint ten nominee directors to function as directors of the company.
Following the above, the government is considering appointment of suitable persons as directors of Satyam. We will let you know about the person being nominated on the board as soon as decision is taken in this regard.
My emphasis added.
I don’t know if this is a precedent but in the context of ongoing compliance issues, this is an excellent example of a government realizing that the risks in the current situation are too great for all stakeholders and is therefore taking decisive action. What’s more, we now know a little more about what was happening at the company. Equally, we also know that PwC is now definitely under the hammer.
More to the point: can you imagine the UK or US governments taking similar action? We often think of India as a land of great inequality and as a mildly corrupt regime. I can guarantee that in the eyes of the world, such actions, when taken appropriately and at the right time are confidence boosters.
My hope is that we will see a speedy conclusion to the major issues and in particular an outline of the failures.
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