Satyam scam has scared small investors

Monday, August 24, 2009
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Hyderabad: India has a huge potential to involve retail investors in the stock markets but they are not coming out to invest because they have learnt a lesson from the Satyam Computer fraud, feels Madhav Mehra, president of the London-based World Council for Corporate Governance. "The stock market participation of Indians is barely two percent while in the US it is 45 percent," Mehra told IANS during a visit here. "Indians have no problem with money. They are just holding it somewhere. They are not coming because they have learnt from Satyam," he added. Describing the Satyam episode as an eye-opener, Mehra said that after Jan 7, when Satyam's founder and disgraced chairman B. Ramalinga Raju confessed to a Rs.78-billion ($1.43 billion) accounting fraud, it was the small investor who had lost the most. Mehra said Indian companies needed to set high standards in corporate governance. "India can't take a backseat in corporate governance because the future belongs to India. Indian companies are not going for full disclosures. There is some requirement of the transactions of mergers, restructuring and acquisitions. People must know what a company is doing," he said. "There are several lessons to be learnt from Satyam. It opened our eyes. It showed how a great company can also be brought down if somebody decides he does not want to be ethical for some reason. India has been able to control all that. India has put the culprit behind bars. The company is now making money." Referring to the role of independent directors in the light of the Satyam scam, Mehra said there was no need for them. "We need directors with independent minds. We need independent boards. The independent directors are not bothered about anything as long as they get salaries. That is why it (Satyam fraud) happened." Elaborating, he said: "There are people who are directors of 15 companies. How can you be an independent director of 15 companies? People have not been able to understand the role of corporate governance." Mehra also called for appointing younger people as directors and ensuring diversity in the board rooms. "You look at the drivers of the companies all over the world. Who are the drivers? The young men, women and people from different backgrounds. We want diversity in board rooms." According to him, compared to the western world, India was still doing well. "In the US and UK, corporate greed is masquerading as corporate governance. What has been found during last two years is that the whole financial services market was interested in creating money for its own people."
Source: IANS
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