Satyam: Cosmic Fail

What a tragic irony!

In case you haven’t heard, Satyam was the fourth-largest IT outsourcing company in India, with 55,000 employees (or so they claimed). The CEO, Ramalinga Raju, recently resigned after admitting massive financial fraud. As of this writing, the company is almost out of cash.

Here we go again…

Satyam has done business with companies and governments in over 60 countries, including the U.S. This scandal appears to be even larger in scope than the Enron/Arthur Andersen scandal of late 2001. Price Waterhouse, the Indian subsidiary of PricewaterhouseCoopers, is facing close scrutiny over having signed off on Satyam’s audits.

Obviously, the much-touted Sarbanes-Oxley law enacted after the Enron/Arthur Andersen debacle did nothing to prevent the recent collapse of the U.S. real estate, stock market, and financial sector. The take-home lesson is that once any corporation becomes multinational in scope, and politically well-connected, no laws, no regulations, no bureaucratic restructuring can possibly keep it honest if its management chooses to do otherwise.

Another reason why outsourcing is wrong

Outsourcing and offshoring are always and everywhere the enemies of accountability. The further away one’s trading partners are located, the harder it is to comprehend what they are up to, and that will never change.

Why corporate cheating is contagious

Whenever one major company in an industry has been “cooking the books” to promote or exaggerate its own success, what effect do you suppose that has? Think about it! Every other executive, every other company in that industry will be pressured to match or exceed the cheater’s inflated results, by fair means or foul, or face the wrath of board members and stockholders.

Some news links and other sources:

• Business Standard: Regulators, government tighten noose around Satyam
• Business Standard: Government supersedes Satyam board
• Wikipedia: Satyam Computer Services Ltd.
• NYT: Satyam Chief Admits Huge Fraud
• IHT: India hears calls for Satyam bailout
• IHT: Auditor in cross hairs over fraud at Satyam
• The Australian: Police arrest Satyam founder, Government sacks board
• Information Week Blog: Satyam And Its 8-Year Ban from World Bank
• Bloomberg.com: Satyam U.S. Investors File Actions Alleging Fraud (Update2)
• TheDeal.com: Enron went bankrupt, but what of Satyam’s future?

Perhaps some of this would be funny if it were not so sad.

Note: The screen capture was taken by 1389AD from www.satyam.com, shortly after the announcement. The pixelated area was blurred in the original.