The Professor of Corporate Governance

Question

Recently, the board of one of the major Indian software company Satyam , had agreed to acquire two companies for USD 1.6B.

Nothing wrong it seems. But these two companies, which are in construction sector, were floated by the relatives of the CEO of Satyam. And these companies are lately doing bad, apparently!

Although the board cleared the acquisition, it is the shareholders who had better sense and made a huge fuss which ultimately prevented the CEO from taking the final step.

Interestingly, one of the eminent professors of Corporate Governance from one of the best B-Schools in the world is an independent Director of Satyam. In India, the job of the independent directors are specifically to prevent such an egregious violation of corporate governance.

To know briefly on the independent director, the remuneration and the deal, you can click here

https://churumuri.wordpress.com/2008/12/ ... ss-school/

Audio · Answer

Wow, good find. Although we don't have all the elements to judge here: were the 1.6bn a bargain or not? What were the synergies? etc. But there's definitively something fishy there!

msday · Answer

Good find filmcity +1. I'm sure you noticed that the two companies being bought were named "Maytas", which is just "Satyam" spelled backwards. This sort of stuff happens in India too often though - I would not be too surprised if the HBS professor has some deep familial/regional connections with the folks at Satyam.

3underscore · Answer

I am sure the synergies are immense. In that synergies are just made up BS to make a deal look viable, hardly quantifiable and rarely realized.

Audio · Answer

Haha, very true!! :-D

Guess that's the banker in me surfacing up...

isa · Answer

Wow that does seem shady. Interesting find!

traffix · Answer

Good luck msday with HBS :-D

. There were absolutely no synergies between the Satyam and Maytas. Satyam is an IT major with over 60% of their revenues coming from the US market. Maytas is a construction company managed by the son of satyam's CEO. So, the only synergy is that the son still lives in his fathers house (quite common in India..no raised eye brows please :-D

). What surprised me though was the fact that angry investors forced the management to cancel the deal. This is not common in corporate India. The management can pretty much get away with anything. I still remember one pharma company that continously lend money to some of its directors although it was going through bankruptcy. Anyways, I dont think this topic needs to be in this forum. Will the moderators please move this to "Off Topic"

traffix · Answer

Guys, just read this in the indian news media. Apart from the Harvard prof, more importantly, the Dean of Indian School of Business (supposedly ranked higher than Kellogg by FT :-D

) was also on the Satyam board as an Independent Director. This has turned into a huge issue in the indian papers. Politicians are calling for the dean's removal. The harvard prof has already resigned. Seriously, if i were the dean, i would have resigned as well. ISB should fire him for setting a bad example. Ironically, from wht i hear from a friend of mine (current student at ISB), the school is a strong proponent of CSR! https://economictimes.indiatimes.com/Sat ... 897355.cms

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