Click to play videoMumbai: The $1.6 billion Maytas acquisition deal pushed through by Satyam has raised questions on the company's corporate governance norms.
Even though the deal was cancelled after shareholders protested, but the IT giant's image has been tarnished.
In September 2008, Satyam Computer Services had bagged the Golden Peacock Global Award for excellence in corporate governance.
But there's definitely nothing award-worthy in December.
Their audacious $1.6-billion acquisition of Maytas Properties and Maytas Infra Ltd has been lambasted from all fronts.
In fact, leading brokerage CLSA considers it as one of the worst corporate governance events in India.
Everyone is asking how has a promoter with less than 10 per cent stake made a call on a huge deal, without approval of those holding the remaining 90 per cent? But Chairman of Satyam Computers Ramalinga Raju is convinced his moves were right.
"The manner in which we have gone about valuations, we have followed meticulous process," says Ramalinga Raju.
Corporate governance is about transparency and raising the trust and confidence of stakeholders in the way the company is run. But the biggest foreign shareholder in Satyam believes Raju was way off mark in Maytas case.
"We need to be very clear that as investors we will not tolerate a change in principal activity without consultation. When you are changing the principal activity in such a dramatic fashion minority shareholders should be consulted and given a say," says Adrian Lim, Aberdeen Asset Management, Singapore.
Experts feel that its shocking for a major software player like Satyam to spend all that cash in an area of business where it has zero experience. Hinting at promoter unaccountability, they indicate, that if completed, the deal would surely set a bad precedent.
"Imagine if this deal had gone through, maybe 50 per cent of the smaller companies would have done the same saying that overnight, there can be no better way of taking away cash from the company. But, lets say Satyam was a more reputed case and they deliberated and have withdrawn it, but what was the precedent we were setting if this deal was allowed to go through," asks Madhu Kela, Head of Equities at Reliance Mutual Fund.
Without doubt, the reputation that Satyam has built over the last decade has been effectively tarnished overnight. And the deal being called off brings to the spotlight, the importance of good corporate governance practices in the functioning of successful companies.
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