Satyam and Golden Peacock

A very interesting thing happened in Corporate India this week. India's fourth-largest IT services provider, "Satyam Computer Services" had proposed to acquire Maytas Properties and Maytas Infra, companies controlled and run by the promoter family, for $1.6 billion (around Rs 7,680 crore).
While Satyam is an IT company, the companies proposed for acquisition were real estate ones. And, they were owned by the Promoters of Satyam. The Board took the decision to acquire these companies whose business was totally unrelated to the core business of Satyam, saying that it needs to diversify.

But, the company was forced to reverse the decision just within a day following strong shareholder protests that saw its stock price fall 30 per cent on the Bombay Stock Exchange (BSE). Shareholders felt that they were not informed of this before hand; were not happy that cash available with the cash-rich IT company should go to a cash-strapped real estate sector company. In short, they lost confidence in the company's management.

Neither the move of the Board to reverse its acquisition deal nor the corporate governance principle of “delighting (the) stakeholder”, as stated on the company’s website, did anything to restore investor confidence. Shareholders started selling off the stocks and the shares fell by 30%. Satyam saw Rs 4,610 crore wiped off its market capitalisation and several analyst firms have rated the company as a “sell”.

"Yesterday’s developments have eroded investor trust in the management and the board to take the company forward,” said a note from Religare Capital Markets.

And, the irony of all this is that Satyam was awarded the Golden Peacock award for Best Corporate Governance practice for the year 2008! (Now, the jury which awarded it to Satyma will have to answer some questions too!!)

It is quite interesting to me to note this 'shareholder activism' in corporate governance. Can the same be replicated in our political governance as well? Can we have an Indian Polity Stock Exchange or something like that, which can be a barometer of the confidence of the general public in the Government? If the government takes a wrong decision and the IPSE index falls dramatically, then probably, it will be reversed soon?

But, the only problem is the already crazy mass media will go berserk. Each small thing will be a Judgement Day. It is too risky to assume that the TV watching public can be responsible citizens with long term interests of the country in mind. I guess, once in 5 years elections are good enough.

Stock market indices are as flimsy an indicator like the Golden Peacock Award in any case ...