A three-member board, appointed by the government this morning to lead Satyam Computer Services will get down to business tomorrow when it meets in Hyderabad, even as some key institutional shareholders demanded they be kept informed of all decisions the new board takes.
In related developments, the Andhra Pradesh Criminal Investigation Department raided the homes and offices of Satyam’s directors, including those of dislodged interim CEO Ram Mynampati.
Meanwhile, the company’s former Chief Financial Officer (CFO) Srinivas Vadlamani joined his colleagues former Chairman Ramalinga Raju and former Managing Director Rama Raju at Chanchalguda jail, after he was remanded to judicial custody till January 23.
A Securities and Exchange Board of India (Sebi) team also quizzed Mynampati for the third consecutive day.
HDFC Chairman Deepak Parekh, who is tipped to chair Satyam’s board, told reporters that the board will meet tomorrow in Hyderabad. The other two members nominated by the government are Kiran Karnik, former president of the IT industry body the National Association of Software and Services Companies (Nasscom), and C Achuthan, former presiding officer of the Securities Appellate Tribunal (SAT).
Sources said that all the three members would be meeting tonight to have informal discussions before the formal one tomorrow.
The informal meeting is expected to chart out the modalities for tomorrow’s crucial board meeting and the way forward, sources said.
Seven more members will be inducted shortly after the three board members meet and discuss the issue. Sources familiar with the developments, however, said the process is proving tricky, given that some of the eligible candidates are connected with other IT companies, raising issues of the conflict of interest. The sources, however, added that government-owned Life Insurance Corporation, which holds over 4 per cent, will be asked to nominate a board member.
At a crowded press conference in the capital today Prem Chand Gupta, minister for corporate affairs, said the three-member board will have powers to appoint new auditors for the company and can name a new management, just like a normal board elected by the shareholders of a company.
The new board will also decide whether to seek the government’s help in terms of financial assistance, Gupta said. This is important in the context of Mynampati’s statement earlier this week that Satyam’s financial situation is precarious.
The appointment of three nominee-directors came within 48 hours of the government obtaining a favourable order from the Company Law Board (CLB) tribunal to supersede the earlier board and have its own nominees.
The move was welcomed by Satyam, which said it marks the beginning of a new chapter in the firm’s history. “It is the best news we have received in the past four weeks”, a company statement said, adding that the reconstitution of the board will “ensure the company’s continued operations, help maintain customer confidence and associate morale, and restore investor trust”.
Shareholders want more say: Some major shareholders like US-based Lazard Asset Management LLC and Larsen & Toubro said they welcomed the constitution of the new board but would like to be kept in the loop on the decision-making process.
In a statement today, Lazard, which holds 7.34 per cent in Satyam, said it “would like to be informed on all matters being considered regarding Satyam”. Lazard also clarified that “reports that Lazard has sought a seat on the Satyam board are incorrect”.
L&T executives said as a 4 per cent stakeholder, the management would expect a communication channel to be set up between it and the new Satyam board.
Commenting on the development, LIC Managing Director Thomas Mathew said the appointment of “eminent people will restore confidence among investors, clients and shareholders”.
Clarifying that LIC was not seeking a board seat, Mathew said: “We are part of the government. Whatever call the government takes we will play a proactive role. Our interest is to see that the company comes up more than seeking board seat... we will await further developments in this matter.”
New board’s priority: In their first public comments after their appointment, the three nominee-directors said putting the beleaguered firm back on track would top the agenda. Parekh told Bloomberg that the board needs to assess the magnitude of the issue and then work on a restatement of accounts. C Achuthan said top priority would be to put the scam-tainted IT company back on the rails and ensure that the guilty did not go scot free. “The first step at the board meeting would be to evolve the strategy on how to go ahead and restore the damaged image of the company,” he said.
Kiran Karnik said that the first priority was to ensure continuity of business and to maintain the confidence of clients.
Parekh has been the government’s troubleshooter on many occasions, but Karnik, a post-graduate from the Indian Institute of Management, Ahmedabad (IIM-A), had not worked in an IT firm before taking charge at Nasscom. Achuthan was the presiding officer of SAT, which hears appeals against the orders passed by the market regulator, for six years until 2003, and a former Sebi member.
Industry welcomes move: Industry groups welcomed the appointment of the new directors and said it was clever thinking on the part of the government to put together for Satyam a three-member board that comprises a financial wizard, an IT genius and a wily investigator — the brains needed to clear the mess in the scam-tainted company.
Confederation of Indian Industries Director-General Chandrajit Banerjee said the new board consisted of people with a deep understanding of corporate governance and turnaround issues.
Ficci President Rajeev Chandrasekhar said the priority of the government “should be to ensure that the Satyam board immediately arranges financing to ensure that salaries and payrolls of the 50,000-plus employees are met without disruption”.
Suresh Senapathy, executive director and CFO, Wipro, said he was happy with the speed with which the government took action including reconstituting this board. “We believe this will help restore the confidence of all stakeholders and the international community,” he said.
Nasscom President Som Mittal said the appointment of nominee directors would help ensure business continuity, build confidence and protect the interests of all stakeholders.
