Corporate governance: Home truth for foreign diplomats
September 27, 2011
Lawyers and accountants (caught) breaking their silence
Sucheta Dalal Our corporate sector and key intermediaries, like lawyers and accountants, follow a nice code of silence when it comes to doubtful practices. But a batch of WikiLeaks cables released on 26th August shows that they are frank and loquacious in briefing US diplomats. After the Satyam Computers scandal, these honchos told Mumbai consulate officials how corporate governance at family-controlled local companies was ‘an illusion rather than reality’ and that firms were reluctant to appoint ‘truly independent directors’ who would challenge management decisions. A financial expert mentioned a corporate takeover where an acquisition price of Rs1,000 per share was publicly announced while owners were paid an additional Rs600 per share into a Swiss bank account. Rumours of such deals abound around major mergers & acquisitions. Lawyers, accountants and investment-bankers—who were making candid disclosures to US diplomats facilitate these deals. Shishir Tamotia, CEO of Ispat Energy, a subsidiary of the controversial JSW Ispat Steel Ltd owned by Pramod and Vinod Mittal (acquired by Sajjan Jindal) said, “most businesses in India are run like Satyam, with little regard for true governance.” Mr Tamotia probably saw many strange practices close-up, also said that shareholders are usually unconcerned as long as stocks keep rising. Darius Shroff of Crawford Bayley & Co told the diplomat that ‘revenue fraud’ and dubious practices in transfer pricing and asset valuation was more ‘rampant’ in Indian companies than outright frauds like Satyam. All in all, top corporate executives painted quite a sorry picture about Indian companies to the US consulate—now, if only they dared to voice these opinions in public meetings and seminars, it would ensure better corporate governance, accountability and transparency. But then, it would also mean less corporate business for them.