Much has been written about the Satyam fiasco, and the prime focus has been on the role of the auditing firm PwC, and the former independent directors who in any organization are actually dependent upon the powers that be, that is the owners of the organization. These powers that be are the ones, who dole out such favours to these distinguished individuals by getting them on board, and by conferring the much misunderstood nomenclature of ‘independent directors’.
Now, the latest twist in this whole episode has been the sensational arrest of two senior partners of the accounting firm PwC, for their alleged role in the scandal, which quite rightly has sent shock waves in the entire auditing community.
There are two ways of looking at the aftermaths of this episode :
1. That the former founder CEO and other powers that be, had the final word in the overall affairs of the organization, and by getting various distinguished individuals as independent directors and a well known auditing firm to audit its books of accounts, these powers that be were only replicating the practise of ‘celebrity endorsements’ in a different way, to boost the overall image of their organization. Of course, as is the case with celebrity endorsements of various products and services, it is a well known fact that the involvement of such celebrities is limited to the extent of photo shoots or ad film shoots, in return for a huge sum of money.
Generally, no one expects any such celebrities to actually believe what they are saying or doing in front of the camera. Now, if such an analogy is drawn between the auditors and the independent directors with such celebrities, then one would be tempted to absolve all the former independent directors and auditors of Satyam, for their acts of omission and commission, which in a way contributed to such a disaster.
Furthermore, like any true professional who is out in the market vending his services, these former independent directors and the auditors, delivered what they were asked to deliver by those who paid a price for the same. Thus, why should they now be held accountable for what has happened ? Let’s think of it , if any product or service endorsed by a celebrity is found to be substandard or not what has been claimed by those celebrities in front of the camera, then would these brand ambassadors be held liable and taken to task, or would the powers that be of those organizations be proceeded against and dealt with appropriately under the law for fraud, perjury, or misleading the public ?
It is worthwhile to recall another scandal involving ‘Home Trade’, which was endorsed by none other than Sachin Tendulkar and Hritik Roshan. While the owner/CEO of Home Trade, Sanjay Agarwal is perhaps cooling his heels behind the bars, his brand ambassadors are busy endorsing other products and services, in return for fancy sums of money. If this is acceptable, then on what grounds have the two senior auditors of PwC been arrested ? After all, they too were simply vending their services, and had to deliver what their paymasters wanted them to deliver in exchange for the price paid to them for the same. Hypothetically, had they refused to play the ball, they would have been replaced by another ‘service vendors’ who would have merrily played along.
According to this line of thought, the two senior partners of PwC could be arrested if any only if, they had doctored the books of accounts of Satyam, by keeping messers Ramalinga Raju and company completely in dark, which as everyone knows is not the case. At the most, the auditing company PwC in general and the relevent auditors in particular should he held accountable with the loss in credibility for not upholding the high ethical standards of their profession, and presenting the books of accounts as deemed appropriate by them in utter disregard to the dictates of their clients. Of course, they should not face any criminal liability for the same,
2. The other way of looking at into this episode is that, the former independent directors of Satyam as well as the auditors were willing accomplice in a crime perpetuated by messers Ramalinga Raju and company. Thus, as in the case of a planned murder, in which the mastermind hires contract killers to carry out the job, which eventually leads to a stringent punishment for both the mastermind as well as the contract killers who were just vending their services for a fee, in this case too all the three parties, that is, messers Ramlinga Raju , former independent directors, and the auditors should be proceeded against for a criminal liability for perpetuating such fraud.
If this line of thinking is adopted, then the arrest of the two senior partners on charges of fraud (Section 420 of the IPC) and criminal conspiracy (Section 120B of the IPC) can be totally justified. But then one wonders, how come the former independent directors have been able to get away by mere criticism, instead of being proceeded against in a similar way?
Now if this line of thinking were to be carried forward and made applicable in other aspects as well, then it would mean –
a) Holding every celebrity personally liable for any misrepresentation of facts in the advertisement featuring him/her,
b) Holding him/her personally responsible for any subsequent drawback in the product/service so endorsed
c) Holding every salesman personally liable for any ‘sales talk’ done for pushing the product/service
d) Every lawyer is to be held personally liable for any act of perjury committed by his /her client in the court of law,
e) Holding every Chartered Accountant personally liable for concealing the real income of his client while preparing and filing the latter’s income tax returns. It is a common knowledge that some clients give a ball park figure to their Chartered Accountants, beyond which their tax liablity should not exceed. Those Chartered Accountants then need to work backwards,
f) And above all, holding every politician personally liable for the overall failure of his/hr political party to fulfil the various promises made in the election manifesto just before the elections.
No matter how desirable or undesirable may be the above, the feasibility of putting the same in practice is very much in doubt.
While the Satyam fiasco has certainly led to a much needed awakening in the various grey areas of our corporate sector, and would certainly lead to the much needed changes for the better in the times to come, the most crucial aspect which is being missed out is :
Can any service provider, be it a lawyer, or a chartered accountant, or even an independent director , be expected to deliver as is currently made out to be, as long as they are at the mercy of the powers that be of those organizations , which give them their bread, butter, jam, besides the a coveted status in society ?
If not, then is it fair to crucify them like this, instead of just baying for the blood of the real powers that be like messers Ramalinga Raju and company, who were the real masterminds of such crime ?
Satisfactory answers to above, would call for a lot of introspection and soul searching.
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