It was quite remarkable (yet sad) that just at the start of the fourth class of our course on Corporate Governance -where we were to discuss the article "Directors' new clothes"- the story 'Raju admits fraud' broke. Even before the course started, we were assured by the professor that the Maytas-Satyam fiasco would be a case study in action. Little did we imagine that bigger waves were travelling in our direction. As our professor tagged it, this is nothing short of a "Corporate Tsunami".
Read Raju's 'confession' here
While a rather sad one given the magnitude of the situation- impacting about 50000 employees and hundreds of thousands of retail shareholders, reputation of the offshoring industry at large etc- this is as real time as a case study discussion can get. While learning the processes of the board of directors, it is difficult to believe Raju's claim that no one in the board had a hold on the financial statements. What was the audit committee doing?
The revelations include an overstatement of cash on balance sheets of more than a billion and a half dollars. It should to be noted is that it was cash that was overstated. It is befuddling that they could manage to do that for several years.
Quoting our professor- 'Truth has to come out when growth stops' one must recognise the weight of this statement. Driven by short term growth targets, there is a small (or large?) component of 'catching up with your claims'. In the sense that you provide guidance based on projected growth. You show accrued income based on trust that remittances will follow. But at some points if your financials had reached a level of fiction that is unrecoverable, you have to start losing the chasing game and, then, when the flow of cash depletes as would happen in a slowdown, the litmus changes colors.
While facts ought to follow soon, there is very little left to imagine whether the company could have done this without the support of the auditors.Two-thirds of the assets (cash) never existed? How can you drag that on for years? What were the auditors (a big one too) thinking while passing the quarterly reports? What about bankers who would no doubt be carrying Satyam's annual reports under their pillows?
The showdown has just begun when it comes to India Inc taking a beating on credibility and corporate reputation. While it is true that this could have happened to any company in India, it has happened to one in the IT industry. Barring few notable exceptions in conglomerates in traditional business, largely IT companies were supposed to be largely clean and transparent. This perception comes from the fact that IT companies dealing with US companies or listed in the US need to adhere to SEC requirements and regulatory standards. Additionally, the company had won Golden Peacock in the recent past. Obviously, this again proves that awards do not build public trust and corporate reputation but a past track record of responsible action does.
Is there a systemic issue in how audits are conducted? As SG, one of our classmates, asked of the professor- Given US has failed to put an airtight seal on financial failures, does India have the wherewithal to implement checks and balances in place to avoid such incidents in the future?
What about the risk to Indian outsourcing industry? Given that this question is raised, what will the Government of India do, as in really do about the irregularities in the system?
PS: This is also a test for the logic of 'Wisdom of the crowds'. Some companies (including midcap) whose numbers growth, in the past, have run into public suspicion radar are already being dumped by investors. In the last few hours, each of these companies' stocks have lost about 25%. So, is the market always right? Are there more skeletons in the cupboard waiting to roll out?
2009-01-04
Man from Earth
I want to believe John. I am drawn to the the late writer Jerome Bixby's idea of truth. The movie itself, thanks to director Richard Schenkman, has a Knight Shyamlansque twist that has to be seen to be relished.
The movie starts with a coterie of colleagues pouring into the house of a professor who has unexpectedly decided to retire young. They try to understand where he is going, what he plans to do but cannot go far with it. Instead, based on what the professor first poses as a hypothetical questions- Would you believe if you met someone who has lived 14000 years?- the farewell party turns into a series of discussions that pick your brain. The professor tells them that he is a Cro-magnon cave man and had stopped aging when he reached 35 years of age. Since then, he has been trying to move around, learn and live with the fact. To cover his tracks and appear natural to those around him, he moves on every ten years.
While highly, and naturally so, sceptical about what the professor is saying- first that he is a cave man and then that he has had the opportunity to spend time with historical luminaries with omnipresent fame, the illustrious academicians play along and ask questions. They do this a half out of academic curiosity and a half out of trying to catch John's give away. That they do not succeed in the latter is predictable.
But, along the way in about 90 minutes of the movie very interesting possibilities open up and the fundamental questions get asked. While the movie set itself does not ,mostly, take you beyond the confines of the professor's living room, a part of your mind is racing at the intensity of what is being said. Issues around history, biology, psychology, arts, ethics, morality and faith get raised. A faith shattering revelation has the group divided over the rightness (not validity) of John's 'hypothetical' actions and a theological literist in tears. As he rolls on with his childhood memories, growth and eons of learning thereafter, your imagination runs amuck with scenes of how John's past could have been . The icing on the cake is a poetic end of the movie that works on the psychologist colleague who had lost his wife the previous night.
Like I said, I wanted to believe the story. I was trying to think if I have met someone that could fit into the profile of John Oldman. I think the script has that quality of playing on your innermost desire to know the truth and therefore to wish that John's is a real story. After all it could provide you with a part explanation of the world around you and before you.
Come to think of it, we never really notice much around us. Much less someone who only is trying to remain inconspicuous by purpose. Is John Oldman the quintessential cellophane man; who is our patch to the past yet trying to remain invisible. Moving on as the patch becomes a fix. It is easy to not know a cellphane man.
Is John Oldman representative of the generational cultures? Cultures, traditions and rituals have changed over the ages and they are doing so increasingly fast every few years, nowadays.
How many times has John told his story? Does it always end the same way? Does any one ever believe him? I want to but probably I wouldn't too; it is far too much unsettling to the rational basis of the systematic, yet incomplete, picture of the universe I have in me. But how much of anything do we really ever know?
Does John exist as a periodic reality check to see if faith, in the larger sense of the term, is sustaining? What would happen if he is able to convince everyone that he is indeed who is claims to be? Would the 'rational' among us cut him up to validate his claims? Would the 'faithful' among us test him by fire to see if he is pure and holy? After all in the largely faithless and cynical world of today, would even god not need to pass the test of fire, if he were to appear before us?
I filter movies from IMDB (www.imdb.com) and unless a movie has been recommended highly by someone, I wouldn't watch it if the score is less than 7.0. I noticed that as of this posting, the movie has an 8.2 from about 20000 people. Now, I know why.
Scores apart, this movie will stay with me for quite sometime.
Happy new year 2009!
The movie starts with a coterie of colleagues pouring into the house of a professor who has unexpectedly decided to retire young. They try to understand where he is going, what he plans to do but cannot go far with it. Instead, based on what the professor first poses as a hypothetical questions- Would you believe if you met someone who has lived 14000 years?- the farewell party turns into a series of discussions that pick your brain. The professor tells them that he is a Cro-magnon cave man and had stopped aging when he reached 35 years of age. Since then, he has been trying to move around, learn and live with the fact. To cover his tracks and appear natural to those around him, he moves on every ten years.
While highly, and naturally so, sceptical about what the professor is saying- first that he is a cave man and then that he has had the opportunity to spend time with historical luminaries with omnipresent fame, the illustrious academicians play along and ask questions. They do this a half out of academic curiosity and a half out of trying to catch John's give away. That they do not succeed in the latter is predictable.
But, along the way in about 90 minutes of the movie very interesting possibilities open up and the fundamental questions get asked. While the movie set itself does not ,mostly, take you beyond the confines of the professor's living room, a part of your mind is racing at the intensity of what is being said. Issues around history, biology, psychology, arts, ethics, morality and faith get raised. A faith shattering revelation has the group divided over the rightness (not validity) of John's 'hypothetical' actions and a theological literist in tears. As he rolls on with his childhood memories, growth and eons of learning thereafter, your imagination runs amuck with scenes of how John's past could have been . The icing on the cake is a poetic end of the movie that works on the psychologist colleague who had lost his wife the previous night.
Like I said, I wanted to believe the story. I was trying to think if I have met someone that could fit into the profile of John Oldman. I think the script has that quality of playing on your innermost desire to know the truth and therefore to wish that John's is a real story. After all it could provide you with a part explanation of the world around you and before you.
Come to think of it, we never really notice much around us. Much less someone who only is trying to remain inconspicuous by purpose. Is John Oldman the quintessential cellophane man; who is our patch to the past yet trying to remain invisible. Moving on as the patch becomes a fix. It is easy to not know a cellphane man.
Is John Oldman representative of the generational cultures? Cultures, traditions and rituals have changed over the ages and they are doing so increasingly fast every few years, nowadays.
How many times has John told his story? Does it always end the same way? Does any one ever believe him? I want to but probably I wouldn't too; it is far too much unsettling to the rational basis of the systematic, yet incomplete, picture of the universe I have in me. But how much of anything do we really ever know?
Does John exist as a periodic reality check to see if faith, in the larger sense of the term, is sustaining? What would happen if he is able to convince everyone that he is indeed who is claims to be? Would the 'rational' among us cut him up to validate his claims? Would the 'faithful' among us test him by fire to see if he is pure and holy? After all in the largely faithless and cynical world of today, would even god not need to pass the test of fire, if he were to appear before us?
I filter movies from IMDB (www.imdb.com) and unless a movie has been recommended highly by someone, I wouldn't watch it if the score is less than 7.0. I noticed that as of this posting, the movie has an 8.2 from about 20000 people. Now, I know why.
Scores apart, this movie will stay with me for quite sometime.
Happy new year 2009!
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