Satyam seva

Across the world,governments are grappling with how to deal with companies in trouble. In many cases the problems are similar: venal or incompetent managements have run basically sensible business models into the ground. (In some cases,by grafting onto those sensible business models like AIGs core business grossly nonsensical ones.) Governments are faced with a menu of options and their attendant risks: intervene or let it fail? How to intervene while ensuring that culpable insiders are punished? Will taxpayers be left holding the baby? Will government control result in sweetheart deals for people with friends in the ministry? Will market forces result in job losses and asset-stripping of a beloved company by cold-eyed corporate raiders? For once,all these governments should turn to the Indian state for lessons.

Satyam was not threatened because of bad bets by its bosses,but because they were crooks; it was not threatened because of an inherently flawed or poorly conceived business model or because it had outlived its usefulness and was in a sunset industry. Satyam nearly failed when it neednt have,at all. But the governments response was exemplary.

What did it do? First of all,it didnt let short-term market over-reaction determine the companys fate. Then,it persuaded independent,widely respected figures from the corporate world to take on Satyam while insulating them from external pressure. It let a transparent bidding process take place in other words,it ensured the market (not the ministers friends) could reasonably and properly discover a price for Satyams assets. It kept Satyams guilty under investigation,and started a public debate on the failures and slip-ups of the accounting profession. And it did all this at a politically difficult time,during elections in the companys home state; and the moving force in getting the job done wasnt one of the familiar stockmarket-acceptable faces of reform,but the company affairs minister,Prem Chand Gupta,from Lalu Prasads Rashtriya Janata Dal. Satyams lesson,above all,as India faces the uncertainties of another election: Indian democracy and the Indian political class are more than capable of rising to any occasion,to answer questions that perplex the more celebrated elsewhere in the world.