Wednesday, March 11, 2009

Satyam and the truth about CSR

While browsing through the website of Satyam Computers several weeks after B Ramalinga Raju’s resignation, I was taken aback. If you click through the site it appears as if it is business as usual. Though there are some news items about the recent unsavoury developments in the company, there is hardly a hint of self-criticism.

The site tells us that Satyam is a great corporation “present in 65 countries, across six continents, partners with 690 global customers, including 185 Fortune 500 corporations and is powered by 52,865 talented Associates”.

It tells us further that the corporation has bagged every conceivable award including, of course, the famed Golden Peacock Global Award for Excellence in Corporate Governance. It has got awards for “providing complete, accurate and timely investor relations information (providing anti-money laundering solution of all things!)” and for being the “most admired knowledge enterprise”. It has been regularly rated amongst the top employers, and has got CMMI Level 5, the maximum level that a software producer can reach in terms of consistent capabilities, and possibly the highest honour in management and software engineering. More interestingly, these awards have come from the most reputed organisations: Citizenship Partner of the Year Award 2007 from Microsoft, others from the American Society of Training and Development, from the Institute of Internal Auditors USA, Corporate Citizen I award for Corporate Social Responsibility from Business World and FICCI, Forbes’ Top Asian Company, listed among the top 13 Best-Managed Companies in India by Business Today and AT Kearney, and among the 100 Leading Pioneering Technology Companies by the World Economic Forum.

Long after the details of the scam had been made public, one could still read homilies about the great contribution to society that this corporate giant is making, together with the whole complex network of organisations that it has floated and partnered with the best of professionals in the field, to be a ‘responsible corporate citizen’. And listed against each of these sister organisations is a long list of global awards to assure us that our future is in very safe hands. On these pages you can find C K Prahlad, Abdul Kalam, Thomas Friedman, and Sam Pitroda, lauding the contributions of Satyam, and/or the organisations floated by it. Universities like Carnegie-Mellon and Stanford have collaborated with some of the NGOs floated by Satyam. Some more surfing will reveal that chief ministers from Uttarakhand, Gujarat, Tamil Nadu queued up to sign MOUs with Satyam and its offspring. Even the then finance minister, P Chidambaram, is prominently featured awarding Satyam Foundation the TERI corporate award for Corporate Social Responsibility.

How do we analyse this phenomenon? When I talk to friends, colleagues, students about it, one constant refrain is that Raju is the one to be blamed. Some say that he was a very smart operator; a few who know him personally, tell me that he was an extremely bright and capable person and it is unbelievable that he could have indulged in something like this! Others add that it was his lust and greed which ultimately led to his downfall and that’s where the matter ends.

But does it end there? Is it all about one individual and his smartness and/or greed? After all, Satyam is a corporation where some of the best and the brightest from across the world work. And the matter does not end even there -- what about all the names that are still being associated with the corporate giant and have been associated with it – the board members, the dons from Harvard and ISB, PriceWaterhouseCoopers, the rating agencies, media analysts, the Prahlads, Kalams, Chidambarams? Some will object that it is unfair that the names of these luminaries should be bracketed with Raju, and that all these professionals and eminent individuals did their job. Furthermore, the Satyam foundations, the NGOs, the ambulance services provided excellent assistance to the needy.

All that is true enough, but is it relevant? I am more than willing to accept that Satyam enabled the best water management schemes, rural uplift, urban development, health services and so on, but surely that is beside the point. What matters – the only thing that matters -- is what Satyam did with its IT business (or Maytas did with its realty business) and how it utilised the massive resources that it accumulated through its huge business operations. What matters is whether it followed the due procedures of auditing and accounting, of sharing the correct information with various stakeholders and due process in taking significant decisions.

And that is where the news does not sound very good – the floating of front companies, siphoning off cash to prop up its realty business, cooking the books, deliberately concealing and/or providing wrong information, influencing government policies and decisions to suit itself, and keeping, it appears, even some of its own top executives besides other regulating agencies in the dark – the list is long and suggests an ongoing, systemic and downright fraud on an ever larger scale.

Can I get away by saying that, as a teacher I won’t teach, or worse, I will sell my grades to the highest bidder, but I am socially responsible if I go to the temple on the weekend or give some small bit of my not-so-inconsiderable salary as charity at the end of the month? Obviously not. So why should anyone accept such an excuse from a giant corporation with a revenue of close to Rs 7,000 crore and more than Rs 1,500 crore in profits after tax, according to its own admission?

This brings me to an even more essential point. It is amusing to listen to all the luminaries who now want to distance themselves from Raju and Satyam -- the same set of (mostly) gentlemen, who till yesterday would not have missed any chance of a photo-op with the bigwigs of Satyam. Now, these very same personalities are telling us that they trusted whatever Raju told them. Srinivas Vadlamani, the chief finance officer of the corporation, takes the cake here; he said that he had 80 people working under him and he believed and “blindly signed” whatever was given to him! Something similar has been said by many others, including Harvard and ISB dons, the most revered of management gurus. That is really interesting because if you read their lectures and writings, it is all about celebrating the pursuit of self-interest, a la the butcher and baker of Adam Smith’s Wealth of Nations: “It is not from the benevolence of butchers, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self love.”

According to this theory, as long as every individual (and therefore every corporation) pursues self-interest, everyone will gain -- from Raju who zips around in his sparkling limo to the person who sweeps the streets he drives on. If self-interest is pre-eminent, there is no place for trust. How then did the same gentlemen who celebrate self-interest take everything on trust?

Modern corporations have become so huge, and their operations have become so varied, vast and complex that the system simply cannot run merely on the simplistic notion of each individual pursuing his self-interest and everyone’s welfare being achieved through market signals. Thus, board members and auditors like PwC end up trusting whatever the Rajus tell them and the common people end up celebrating the Satyams of this world for the efficient ambulance services that they run, certified by the Kalams and Friedmans.

What is curious is how willing we are to construct an elaborate set of laws to catch an ordinary individual if he does something wrong, while turning a blind eye to the most powerful like Raju and Satyam so long as they are making more money and having bigger cars, swankier offices and wilder plans to become even bigger! It is like saying that on the highway there will be rules only for pedestrians and bicyclers and none for drivers of SUVs because we trust the latter – by the teleological/circular logic that since they are zipping around in SUVs they must be rule-abiding!

Is this democracy or are we back to medieval times when there were rules only for the lower orders while those who governed the system, or had the right pedigree and the right connections were a law unto themselves? To me, the answer is the latter. Nor is it any consolation that only one ‘truth’ or ‘Satyam’, has come out in the open. We have not heard similar stories in the media about the other big corporations but that is not because there is nothing to tell. The rot is oozing from every pore of the present system and whether we like it or not, the time has come to say that the (corporate) Emperor has no clothes. Are we going to continue behaving like ostriches burying our heads in the sand and wishing away the impending storm?


By Rahul Varman - Professor, Department of Industrial and Management Engineering, IIT Kanpur

Source: http://infochangeindia.org/200903097648/Corporate-Responsibility/Analysis/Satyam-and-the-truth-about-CSR.html


Forget yourself for others, and others will never forget you.

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