I see several positives in the episode:
- Investor activism: institutional shareholders, domestic and foreign, have been much too passive all these years. It's nice to see them flexing their muscles.
- Pressure for change of management: There is talk of a hostile takeover and also pressure on management to step down consequent to a bad decision. This again is much needed. Management is seldom made to pay a price for bad decisions.
- Focus on independent directors: The independent directors on the board of Satyam (see my post yesterday) have egg on their faces. They have been named (and hopefully shamed) in the media. Great!
- Client reaction: One of the best stories I read was in BS about some of the top clients evaluating their relationship with Satyam- they are not sure about sticking to Satyam as there are doubts about the intent of management.
Further, I would like Sebi (or some NGO) to have on their website a link on 'Questionable decisions by management'. Decisions such as the present one should be recorded and also the names of directors involved. Analysts should check to see which other boards these directors are sitting on and take a view on those companies. Other companies planning to appoint independent directors would also benefit from scanning this link while deciding their choice of independent directors.
There is a clear message that needs to be sent out: as independent director, your role is not to play deaf-mute on the board.