People's Democracy

The Central Committee of the Communist Party of India (Marxist) now in session at Kochi has issued the following statements on January 8, 2009

The shocking revelation of an over Rs 7000 crore fraud by the promoters of Satyam Computers has shown that Indian big business has started emulating the worst corrupt practices of their counterparts in the advanced capitalist countries, especially the US. It is indeed outrageous that Satyam was given the "Golden Peacock Global Award" for Excellence in Corporate Governance! The Satyam Chairman B Ramalinga Raju has admitted that the company has been manipulating its balance sheets for years to show inflated profits and under reporting liabilities.

Such fraudulent corporate behaviour, as the Enron scandal in the US in 2001 had shown, is motivated by the greed to increase the share prices and market capitalisation of the company. A former Enron CEO is currently serving a 24 years prison term and Enron's accounting firm Arthur Andersen had to be dissolved for being complicit in the scam. The urge to quickly become rich, motivated fraudulent reporting of profits by the top Enron management, since higher profits led to higher share prices and resulted in higher individual net worth for the managers. Such corporate frauds have been encouraged by the process of deregulation and financial liberalisation, which has made company managements obsessed with their stock market valuations. The UPA government must learn the proper lessons from this episode and desist from further emulating the failed system of the US. Corporate regulations need an overhaul in India in order to discipline big business.

The CPI (M) demands that the government take suo motu cognisance of the admission of guilt by the Satyam chairman and immediately proceed against him. The concerned directors in the Satyam Board and the audit firm Pricewaterhouse Coopers (PwC) must also be held accountable for the gigantic fraud, and strict penal action should be initiated against them. It is noteworthy that PwC partners were earlier indicted for fraudulent accounting after the collapse of the Global Trust Bank.

The CPI(M) calls upon the UPA government to take immediate steps to safeguard the interests of the 53,000 employees of Satyam Computers. Several departments and agencies including the ministry of Corporate Affairs, SEBI, Andhra Pradesh government and Mumbai Police have initiated probe into the Satyam affair. It is important to ensure proper coordination between the separate investigations and monitoring by a single department of the union government. The entire fraud should be thoroughly and speedily investigated and all the beneficiaries of the scam brought to book.