Satyam: Addiction to power

Synopsis: Power and its trappings can become an addiction. The habit grows unmanageable because the individual just can’t stop feeding it – off others, employees and investors alike.


New Year turned upside down for thousands of employees at India’s fourth largest IT company. Over 6,000 campus recruits were also stranded jobless. The bitter truth at Satyam Computer Services was that company books were cooked. Ironically, the word ‘satyam’ means truth.

The bogey

Returning from USA in December last year, founder-chairman B Ramalinga Raju raised the bogey of takeover by IBM and others attracted by the company’s large cash reserves of INR 8,000 crores (about 1.649 billion USD). And unless Satyam diversified into various unrelated industry like properties, the outsiders would boost their own profits downsizing it.

Thus the stage was set for the acquisitions of Maytas Properties and Maytas Infrastructure for that same monetary amount. But, unconvinced by the story, irate shareholders blocked the move.

“Satyam is gone”, Raju told his wife as he prepared his resignation letter to the Board of directors. His conscience was too burdened by guilt, he wrote. Not by the imminence of IBM, but his own corporate fraud to the tune of INR 7,800 crores!

The worms

He, his brother Rama Raju, the MD and CEO, and CFO Vadlamani Srinivas quit the company, and were arrested. Investigators uncovered ‘worms’ in plenty:

• Profits had been inflated for years to drive up the share prices.
• The diversification was a cover for the ongoing fraud. Raju’s sons run Maytas - really just ‘satyam’ spelt backwards.
• Before the confession, other Satyam directors sold off company shares.
• Satyam’s foreign placements have based on fabricated profiles.
• Amongst the 53,000 listed employees, about 10, 000 names may be false.
• There may have been complicity in the scam by external auditors PriceWaterhouseCoopers, beside about 45 banks effecting various deal transactions.

The power fulfilment

Fact is the much-touted cash reserves didn’t exist. In years of ongoing fraud, millions were diverted into real estate. Investigations revealed about 10,000 acres of benami property - held in the names of various members of the Raju extended family.

Power corrupts, said Hobbs, and absolute power corrupts absolutely. The Raju coterie occupied all the top spots of company management, and operated by 'groupthink'. Corporate governance meant the Chairman-CEO made decisions, and others acquiesced. Those who could have questioned the fund diversions - accountants, auditors, banks and Board – were perhaps intimidated by their sense of power, or simply chose not to sour deals for their own concerns.

Power and its trappings can also become an addiction. It leads to compulsive behaviour, which is generally associated with the more identifiable types like eating, drinking, smoking, shopping or gambling. The lack of adequate dopamine in brain’s reward centres leaves them unsatisfied and hence the repetitiveness in behaviour.

The habit grows unmanageable because the individual just can’t stop feeding it off others – like employees and investors for the Satyam top brass. Fulfilment through exercises of power takes command. Despite their burdened conscience, the Rajus have retained a battery of 25 lawyers to defend them. In prison, they object to being lodged with ordinary criminals and demand special treatment!

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