Satyam’s board dismissed, government nominated board to step in after a week

The government acted in time to stop tomorrow’s board meeting of Satyam Computer Services. Otherwise, a 3-member board would have met tomorrow, to consider the resignations of its chairman and managing director and discuss options before the company. This is the same board, down from its original strength of nine, which has presided over the worst corporate scam in the new millennium in India. Any decision of this board would have been viewed with suspicion.

Investor confidence is already low, despite the promoters not running the company. Their resignations have not been accepted, meaning they continue to remain on the rolls. Yesterday’s conference in which Ram Mynampati and his team of senior managers addressed the media did little to inspire confidence.

That was evident in the manner in which the stock market reacted today, sending the Satyam stock down by another 40% to close at Rs 24. There was a lot of jargon floating around, familiar but not comforting –business continuity, corporate transparency and leadership transition, said the press release. The team may be completely innocent as they claim to be, but it is difficult to believe that an entire top team of talented, intelligent and educated people were oblivious to not only a financial but also a fraud that involved assets, revenues and hiring people for non-existent projects.

Mr Mynampati’s claim initially that the CFO would be coming in to office next week and then his revelation, much later, that he had resigned, raised doubts. Their inability to give clarity on several aspects too did not help.

What happens next?
The government has dissolved what little remains of the board. This has certain implications. While Mr Mynampati can continue in his executive position, as president, commercial and healthcare, but his position as the interim CEO seems shaky. The government should have immediately nominated a team; waiting for a week is a mistake. That team should have taken charge tomorrow, if not Monday.

Who should be on the board?

These should be industry stalwarts, no professors please. A couple of people from the Tata and Birla strategic management group could be nominated (they can be on deputation, no big ticket acquisitions are going to happen in this market, so their services can be spared). Some very senior lawyers, accountants and finance executives need to be on board. The person heading it has to be someone everyone looks up to and who has enough speaking power within the government too.

Who should not be on the board?

No software industry leaders, definitely not those who have vested interests. Pulling someone out of retirement may not be a bad idea, though. No investment bankers. No bureaucrats, serving or retired unless it happens to be someone of really high calibre, like a former RBI governor.

What will this board do?

First, make some key external appointments. A CFO must be found quickly, someone who has perhaps worked in the software industry and is now working elsewhere. His role will be to evaluate how deep is the mess and how it can get out of it. His report will decide whether they will make an attempt to revive this company or simply put it up for sale. The most non-controversial nominee would be a senior banking industry official. This board will perhaps also set up a management committee, headed, perhaps, by an external CEO, which comprise professionals to manage operations, purge the company of rotten people and processes and advise the board on the future course of action.

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