Column

In September 2008, the World Council for Corporate Governance announced that its Golden Peacock Global Award for Excellence in Corporate Governance for the year would be awarded to Satyam Computer Services.

The lead judge of the high-powered panel that decided the winner was Dr Ola Ullsten, a former prime minister of Sweden. A newspaper report at that time said, “The honour is especially relevant given that corporate governance best practices are considered key benchmarks by stakeholders who evaluate corporations. In fact, their importance is magnified in difficult economic environments.”

This corporate-speak is no doubt lifted from some press release issued by the company or the Council. It makes little sensethoughit sounds impressive. It is meant to induce awe and respect among readers and“stakeholders” — customers, peers, regulators, shareholders, both current and future. It also puts a magnetic ring around the company that makes it difficult for anyone to penetrate this gobbledygook and understand its real workings.

By now we know that the massive edifice known as Satyam, the darling of investors and one of the showpieces of India’s software revolution was a sham. And we cannot understand how so many top level institutions and gatekeepers — analysts who track companies, regulators and most of all auditors — couldn’t see what was going on. Executives of DSP Merril Lynch managed to spot within less than two weeks what Price Waterhouse couldn’t for years; who are they kidding?

But one key factor in this whole equation has so far not been mentioned much —the media, which too missed looking at him and his company closely. After all, it was winning all those governance awards. The business media, press and television, wrote about Satyam for years but rarely examined the company critically. Ramalinga Raju was a much sought after interviewee, less for his comments about his company and more to discuss his “vision”. He got awards that were either sponsored or supported by large media outfits.

Here the question arises — why blame the media if everyone else too fell for Satyam’s smoke and mirrors act? And it is a legitimate question. Journalists are not supposed to do the job of auditors or SEBI. Their job is to report. The auditors passed the accounts, the shares went up and the press reported it. But it is not so simple either. A journalist has to understand what he is reporting. He must at all times keep a distance that allows for objectivity and fairness. It helps if he has more than a pinch of healthy scepticism to allow him to see through all the guff that companies throw at him. On most of these counts, many of today’s journalists fail to qualify.

To understand this fully, one has to go back to the 1980s. Till then, business stories were tucked away somewhere at the back of the newspaper. Business journalism really came into its own with the first stock market boom, around 1985. But reporters then were rarely experts in the business — they could not read balance sheets and nor understand policy. Corporate chieftains had little difficulty in convincing them about their greatness.

As a better class of number-crunching journalist emerged, scams big and small were exposed. Even so, the history of business journalism is littered with scamsters who had been poster-boys written about as visionaries — Harshad Mehta, Pavan Sachdeva and yes, Ramalinga Raju. Today the business media has proliferated and countless millionshave entered the stock market as investors. They hang on to every word of television anchors and ingest every bit of analysis in the papers. Yet, has the coverage become more penetrating and insightful? Do journalists throw sharp and inconvenient questions at corporate bosses?

Not necessarily. Because the barriers to critical evaluation and reporting have increased. Large companies deploy several weapons from their armoury to deflect detailed examinations. PR outfitsensure that their side (and often only that) is heard. There is always the (unstated) promise or threat of advertising or worse, a big legal battle. And not to forget the media is now in the awards-giving business, which completes the cosy circle.

I must point out that well-managed companies rarely actively put pressure on journalists, but such is their glamour and power that newspapers often do not examine them in the manner they would, say the municipal corporation. Going after the politician orbureaucrat is easier than the businessman. Just watch a charming TV anchor flirt with a CEO as she asks him about his corporate philosophy to understand that.

So a combination of lack of expertise, credulity and internalised fear about a corporation’s power ensures that the media does not delve too deeply into corporate claims. There is no dearth of fine journalists who can see through a tycoon; they know that for all the talk of “corporate governance” or “best practices” or “world standards”, the company is run on feudal lines, has little or no professionalism and is siphoning off money. But somehow that does not make it to the newspaper or the television channel. After Satyam’s debacle, as the accounting profession and others look inwards to see how they failed, perhaps we in the media too will do some introspection why we could not see through Raju’s great vision.