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Will Satyam lead to a change?
January 16, 2009
Let me dare to predict how regulatory and corporate India will resolve IT major Satyam's [Get Quote] scandal/saga.
Soon, it will be business as usual; that is, creative accountancy and cover-up by using corporate image-fixers. The media, too, will fix itself. And Satyam will not lead to change.
But why should I, an environmentalist, worry about corporate (mis)governance? The reason is simple: it is clear corporate India, working its way to development, is doing so at the cost of the environment and the livelihood of the poor.
So what do we find behind this scam to see the 'nature' of the cover-up? Satyam did everything by the best of global books and principles. It polished its image, in a world of make-believers, to perfection.
We need to crack this problem. Let us be clear, companies today hire the biggest auditing firms and hi-fi consultants not because they want to get the work done diligently but because the latter have the public image and the public-relations wherewithal. They pay for protection, not for auditing services.
A few years ago, investigating the sale of carbon credits under the Clean Development Mechanism (CDM), we found the auditing agencies hired to certify the project were indulging in nothing less than fraud.
When we published our findings, we indicted the CDM process more than the auditors.
The international community, in this case, has designed a process in which the project proponent hires a consultant to do the project design and the same company hires a validator agency to certify the project report its own consultant prepares.
The obfuscation in the procedure makes it important to hire a big fish certifier who knows the ropes. Result: A flourishing business for creative carbon accountants.
The national system for Environmental Impact Assessment (EIA), to provide another example, is no different. There have been cases, reported again and again, of consultant companies preparing fraudulent documents. But not a single agency has been publicly blacklisted.
What encourages this system, fundamentally, is the lack of scrutiny. What emboldens it, forever, is the lack of penalty for misdemeanour. But this is not an accident. This is the result of deliberately changing the nature of India's democracy, by weakening institutions responsible for oversight and regulation.
Satyam is a crack in this system. But are we willing to prise it open? When will we be?
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