Archive for October, 2008

The Big Swindle in Corporate Governance

Thursday, October 30th, 2008

Iam in the process of launching a weekly magazine. The dummy issue is printed and ready to be sent to potential advertisers and for feedback from likely readers. We in the office all agree that we couldn’t have chosen a more logical time to launch a media company, given the expected fall in GDP growth rates, the cuts in advertising spends, and all the strident breast-beating about the definitive end to all good times for all foreseeable future. So one of my colleagues had a suggestion on how to market our magazine. It was a powerful idea.

Get PricewaterhouseCoopers, he said, as our auditors. Get them to certify a circulation of 7,00,000 copies by the end of the first quarter, then get them to introduce us to all the advertisers who are PwC clients. This is a failsafe strategy. We are currently just working out what a good circulation would be: 5,00,000? 7,00,000? Would a number like a million be less credible than we would ideally want?

OK, lots of other people more knowledgeable than me have said it, but let me just add my $0.02, no different from the other commentators’ $5. What PwC has done is an utter disgrace. Maybe it was one senior partner of PwC who is responsible, and no one else knew. Yet, the firm must take responsibility for this criminal act ranging over seven years. I remember an editorial meeting at The Financial Express a year ago, with all of us wondering how Satyam’s quarterly results were so much better than those of TCS, Wipro and Infosys. It seemed to be the best-managed software company in India, and we wondered if we should do an in-depth analysis of what Satyam was doing so right. We didn’t, finally. The moment passed, thank God it did.

There was no way that Ramalinga Raju or PwC could have got away with the fraud. As Raju mentioned perceptively in his letter to his board, he was “riding a tiger” and couldn’t get off. When he did helplessly clamber off, the tiger turned and ate him. As has happened to so many of our hotshots: from Rajendra Sethia to Harshad Mehta to Ketan Parekh. But men like Raju never learn.

The gall of the man. To say in his letter that he has not made a single rupee out of the fraud he perpetrated. He fixed balance sheets to show earnings 10 times the real figures to inflate stock prices, systematically sold off most of his holding in the company at a huge profit, and he didn’t make a single rupee? The truth is that he gambled his ill-gotten gains on real estate with advance knowledge from successive Andhra governments about where prices were likely to soar. Then sub-prime hit the fan. Land prices tanked and Mr Raju found that actually he had raped Satyam so brutally to pursue his greed that the company didn’t have the cash anymore to run operations beyond a month. It was not his conscience that forced him to admit his crimes. He would have been exposed in another day or two anyway, so he did the smart thing: he confessed, expressing deep regret—Hansie Cronje 2.0.

But it’s not only Raju and PwC who are suddenly naked in public. The independent directors on the Satyam board were a stellar lot. Think of Krishna Palepu, the Harvard professor acclaimed as the world’s greatest expert in corporate governance. His official CV states that “in the area of corporate governance, Professor Palepu’s work focuses on how to make corporate boards more effective, and on improving corporate disclosure”. Among the executive programmes he teaches is “Audit Committees in a New Era of Governance”. “He also co-led Harvard’s Corporate Governance, Leadership, and Values initiative, launched in response to the recent wave of corporate scandals and governance failures.”

A friend of mine wrote to Palepu. “Evidently,” he wrote, “you are guiding US-based global corporations in such matters. However, in your ‘home’ country, you are helping organisations like Satyam steal shareholders money. My question is simple—does this make you a traitorous hypocrite, or merely a greedy criminal? I’m inclined to the latter, but as an eminent Harvard professor, perhaps you can guide me on the correct terminology? Look forward to your response.”

Guess what? Palepu has not replied. “Greedy criminal”, I would think.

Ganguly ends it in style

Sunday, October 19th, 2008

Oct 19, 2008

I’ve begun writing this column minutes after Sourav Ganguly completed his century at Mohali (and was dismissed almost immediately afterwards trying to hit one of his trademark sixes). And what I can only say is: Salute! And how fitting that he ends it against Australia, against whom he has fought his most memorable battles, on the field and in the mind. Ganguly’s place will be reserved in cricket history along with all those quirky people whose statistics are not at the top of the spreadsheet and whose numbers give any indication of what they achieved. Mansoor Ali Khan Pataudi’s career average hardly reflects the fact that he turned a bunch of habitual losers into a team of occasional winners. Gundappa Vishwanath’s statistics won’t tell you that every century he scored was a match-winning or match-saving one. Mohinder Amarnath’s Test average of 42.5 (Ganguly’s is 41.7) will mean nothing to those who haven’t seen him face the most fearsome pace attacks in the world and stare them down.

Selected to represent India at the age of 19 in 1992, he came in to bat against Australia in an ODI after Srikkanth had fallen for 4, Sidhu for 1, Manjrekar for 1, and Azharuddin for 8. He scored 3, and never played for India again for four years. When he was selected for the England tour in 1996, we scorned the selectors’ decision: yet another example of the zonal quota system. But he scored a century on debut and then another in the next test. We thought he was a genius, an Indian David Gower. And then he proved us wrong; bowlers figured him out. Bowl at his body, target his ribs. You can contain him. So he trained. He put on more body armour than any batsman in history and he learnt the pull and the sweep.

Then they said his style of batting was only good for Test matches, not ODIs. So he showed them that he could hit more clean sixes than any Indian batsman in history. Legs moving both sideways and forward at the same time, making sure that his bat met the ball at just the right sweet moment, and then a stroke that is basically a golf shot. Tendulkar’s record of most Test centuries and highest aggregate Test runs may be overtaken one day (Ricky Ponting is a contender), but the Tendulkar-Ganguly ODI opening partnership records are unlikely to be.

And then he gave up the opener role, handed it to Sehwag. He could have made the Tendulkar-Ganguly record even harder to reach; but he was more of a captain now than a batsman. As captain, the statistics say that he is the most successful ever for India. But perhaps the statistics tell a bit less than what he achieved. Like Clive Lloyd and Allan Border, he built a team from scratch. Hardly any Indian captain had a stormier relation with the selectors and emerged victorious almost every time. Many of the men who play for India today owe their careers to Ganguly. Players receiving the man-of-the-match award thanked him on live television, for backing them; they did not say “the boys played well”. This had never happened before.

He was dropped. He appeared in a Pepsi ad, asking us whether we still remembered him. We lamented how low he had fallen, to resort to this pathetic plea for love, approval, forgiveness, whatever. Today that thought is stood on its head. It seems—seems—like supreme confidence. I’ll come back.

As cricket historian Ramachandra Guha has said, Ganguly was the first captain after Pataudi who was not biased towards any region. The team he built was a rainbow coalition. He just wanted to win. At any cost. This was a man who would take wild chances, intimidate, insult, try to influence umpires, anything it takes, to win. I don’t think any cricketer has been penalised by match referees more than Ganguly. Neither has anyone got more wrong decisions as a batsman than him; umpires hated him.

When he announced his retirement, a friend told me: “He is going to score at least one century this series.” Ganguly has proved him right already. It has nothing to do with age, technique, eye, reflex, footwork and all that textbook crap. It’s about something else, a knowledge of what you were born capable of, and your greed to achieve that. And also, the awareness that you’ve got there. But. He shouldn’t have started moving before the ball was bowled and Cameron White saw that and bowled a bit wider so his attempted six was a catch to mid-off.