Satyam Scam-

Corporate Reputation Risk Management Perspective

This Cyberabad scam has multiple dimensions. It is not just IT industry's own reputation that is under a cloud. Reputation of many others including that of SEBI,Union Ministry of Corporate Affairs, The governments ( present and predecessor) of Andhra Pradesh, the Institute of Chartered Accountants of India, independent directors of Satyam board that included an ex-cabinet secretary to union government and Director of ISB have come under the scanner. The business media is also an accused in this scam as it failed to undertake due diligence in its reporting of Satyam's success.

 It has global ramifications because IT is global in its business reach in terms of services, clients, supply chain and investors.PWC, the company's auditors have international arms. None of the international audit firms in the recent past have distinguished themselves in their independent scrutiny function. There is an international history to this audit lapse.

Second, Satyam like many other competitors was listed on bourses abroad. In the Flat world of knowledge power, success and scams flow in many directions. Cities like Hyderabad,Bangalore,Singapore have become international IT capitals because of their global reach and what happens in those cities vitally affects the world.

Satyam scam is not just a corporate scam .It has deep political nexus. The company promoters politically leveraged its iconic IT  status to derive benefit from  land deals that were possible because of political patronage.DMRC chief Sridharan had pointed out this when Mayta properties had won the bid for Hyderabad metro bid.Ramalinga raju is still a freeman,15 days after the scandal broke out; this  hints at political nexus.

The Golden Peacock Award for Governance won by the company recently clearly show the worth of such awards. Most media houses and channels have begun the doubtful habit of sponsoring awards to corporates and corporate leaders. Often such channels seek money and sponsorship of awards from Corporates and brands themselves. There is bound to be suspicions about possible quid pro quo arrangements and PR effect of such exercises. Therefore, getting any such awards is no assurance that the corporate has or can live up to the acquired image. The awards and their sponsors have perhaps lost their luster.

Satyam scam perhaps can be traced back to the promoter's brazen move some six years ago to acquire an unknown small IT entity owned by their own relatives by paying hundreds of crore in cash. But no serious probe was instituted then and no one wanted to scrutinize the deal because Satyam was rated as the fourth IT major of India and earnings were comfortable for investors and auditors. The media after a brief interest in the story buried it.

The Satyam scam clearly shows that in the present political and business governance environment it is possible to avoid reputation risks by surrounding the corporate with appurtenances necessary for gaining reputation without actually working on it. That is because the fence is eager to eat the seasonal crop.