AUDITORS PRICE WATERHOUSE : Will Surely Pay the PRICE as there is not enough WATER to douse the SATYAM FLAMES that are engulfing their HOUSE !

Within just one day of Satyam’s Promoter Chairman,Ramalinga Raju confessing to cooking up the Books, in his letter to the Board,the Auditing House and one of the ‘Big Four’,PRICE WATERHOUSE is already being relegated to history for their role in this unfolding and sordid Satyam Saga…remember how the Auditing Giant,Arther Anderson wound up when Enron failed !?

Price Waterhouse audits over 100 listed Indian companies like the Auto Giants Maruti and even the huge HCL Group in the Software Sector…so it’s not that they don’t have any experience of auditing software majors…..So their obvious lapses when auditing Satyam was a huge shocker

I remember that in 2007, when I was at a High Profile Corporate Governance Seminar in Mumbai where the dignitaries were Heads of Exchanges and Government Ministries and Leading Corporate and Auditing Houses from all over India,there was a very ‘show offy’ lady from Price Waterhouse whose presentation revolved around their specially developed software of a Corporate Governance System that clould be implemented by Corporates….When the Chief Secretary of the Orissa Government,one Mr Patnaik,asked her how much would this Software and Implementation Cost and could it be applied to PSU and Government Set Ups,this lady had the bloody cheek and arrogance to state ” You probably would not be able to afford it !…It would cost over Rs One Crore “….There was a shocked and studied silence for a few moments on her brazenness…When I was asked to address the audience I commented on this sort of arrogant and snobbish mindset by professionals..She was just one of a Tribe, that sadly has many members,who have inflated egos and inflated opinions of themselves and their firm and status….I daresay it’s a contagious American Banking and Corporate Trait…but look where it’s landed America and it’s once major Powerhouse Icons !

Auditors are appointed by Shareholders at the AGM to ensure Independent Review and Audit of the Financial Books and Assets…but for all purposes their Independence is severely compromised as they have to interact with Management and Promoters to solicit increase in Fees and potential other Business like Certification,Tax and Conultancy work in Mergers and Acquisition and Valuation Situations….even though the ICAI and the Companies Act has directives that should be followed and practises so as to not create any Conflict of Interest in Auditors,these firms find a way out by routing business other than audit to other front or related and friendly firms…as this is widely practised by most firms in this competitive era,the ICAI is not a very strict enforcer of directives and guidelines….this strengthens and makes for a compelling case for the government to intervene and set up a seperate legal body to conduct Audits or create a Regulatory Body for Auditors.In fact the New Amendments to the Companies Act will involve stricter and more stringent compliance by Auditors and Directors read more

Satyam Independent Director should attend one of his own courses!

Last Night I was amused and then rather angry to hear Prof M Rammohan Rao,an Independent and Non Executive Director on the Board of Satyam Computer Services Ltd

He was defending the decision taken by them for Satyam to acquire Promoter related Maytas Companies

Menaka of CNBC TV asked him which was the lesser of the Devils

  • Entering into a secondary market deal with promoter related parties where the Satyam Monies would go to these related parties directly or
  • Infusing Capital and  Investing directly into the Maytas Companies by accquiring New Shares 

Would you believe it !…Prof Rao professed that it would not have looked good for Satyam to directly invest in the Maytas Companies !…He is of the opinion that Monies directly to Promoters Sons is a better idea ! 

This Director is the Dean of ISB and as a Satyam Director earned a Commission of Rs 12 lakhs last year in addition to sitting fees of Rs 1.2 lakhs plus held 10000 Stock Options for Equity Linked Restricted Stock Units at a grant price of Rs 2 

Methinks this Dean needs to attend one of his Own Classes on Corporate Ethics and Governance at the ISB

Another Reflection…..Another Independendent and Non Ececutive Director,Prof Krishna G Palepu in addition to Commission of Rs 12 lakhs and Sitting Fees of Rs 40000 ,also received Professional Fees of Rs 79.51 lakhs from Satyam for FY 2007/8

Don’t you think such Monetised relationships will cloud the Independence of these Directors at Board Meetings ?

I mean, even if the Directors felt this Diversification was beneficial to Satyam,they surely must have realised that nearly all of Satyam’s Cash of @ US $ 1.5 billion would move out quickly to the Hands of the Promoters in this US $ 1.6 Billion Acquisition of their stake in Maytas Companies !…….Why would the Directors  have agreed to deplete Satyam of all of it’s cash !?…Defies Common Sense,Conventional Wisdom,Rationality and Logic

I have read the Conference Call transcripts to stakeholders to justify this decision as well as emails send by Satyam Founder,Ramalinga Raju to Employees and Associates after reversing the decision…..Was Delighted that SBI Mutual Fund and Templeton had the guts and courage to vehemently and voiceferously oppose Satyam’s Chairman and CFO in the Conference Call  

I too am a Satyam Minority Shareholder and I strongly advise Ramalinga Raju to keep quiet to avoid putting put his foot in his mouth and further dent “the established brand of Satyam” as he boasts of.

To appease shareholders Ramalinga Raju has now announced a Board meeting for December 29,2008 to consider Buyback of Shares

I would also advise  him to consider returning cash to shareholders through a High Special Dividend of atleast 1000 %…That would mean a dividend of Rs 20/share and an outflow of Rs 1340 crores on 67 crores shares of FV Rs 2…Even after this Satyam would yet have over US $ One Billion in Cash   read more