Board of control

In the Satyam affair,the interests of all these entities are at stake: shareholders,employees,debtors and customers. The appointment this weekend of three members to Satyam’s new board should go some way in salvaging confidence that stakeholders’ interests will be seen to. But realistically speaking,there will have to be some prioritisation. First of all,what must be salvaged is a working company which keeps most of the existing employees and most of the existing customers. In an ideal world,India would have had a well-functioning bankruptcy process. When the company got into trouble,it would have gone into the bankruptcy code which would have solved this very problem. While we can regret the lack of action on this front,we have to design a set of compensatory actions which replicates what a well-structured bankruptcy code would do.

The window of opportunity to rescue some value out of Satyam is open for only two to four weeks. Actions are required at a very high level of speed and efficiency. Hence,a high quality board needed to be put in place,as it was on Sunday. The board must continue to have strong financial incentives and make commitments of high intensity time involvement in the early weeks. The relaxed style of functioning of ordinary Indian boards is not useful here. The board must pick a core management team to run the company. This team also requires very strong financial incentives so as to fight,with passion and intensity,the battle of putting the company together. The good bank/ bad bank model can be applied. The company must be carved up into a “Good Satyam” and a “Bad Satyam”. Good Satyam must be a very simple company: just a bunch of offices with employees,a set of customers,and a viable business. This company will face cashflow difficulties,but a good quality board and management team should be able to overcome these.

But most of all,every effort must be made to see that this process of corporate rescue is not politicised. It is unfortunate that the Congress and TDP in Andhra Pradesh have not resisted the temptation to use the Satyam case to score political points. There is a danger that if this politicisation continues,the real issue of sorting out corporate crooks will be lost; nobody will be called to account,and issues vital to India’s national interest — its image in a reforming business environment and,more particularly,the interests of more than 50,000 employees and the future of the Hyderabad metro project — will be compromised.