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Uday Kotak: Auditors, Bankers, Lawyers Need To Be More Accountable

09 January, 2009

In the wake of Satyam scandal, the role of third parties like auditors, lawyers, merchant bankers and rating agencies have come under heavy scrutiny. Uday Kotak, Managing Director of Kotak Mahindra, has called for the need of third parties to be more accountable. Kotak was speaking at a CII function organised for the launch of the report ‘Transition to IFRS: A Governance Perspective’.

Corporate governance has come to the forefront after Satyam chairman Ramalinga Raju earlier this week resigned following his revelation of falsifying earnings and assets. “Satyam is a good wake up call for India Inc,” said Kotak. Also the need for regulators in India to be more hands on rather than relying on other agencies is felt strongly now than ever before. “Regulation will have to focus more on direct oversight,” said Kotak.

The fraud by one of the largest and supposedly one of the most reputed IT firms in India has raised questions on reputation of corporate India. “I genuinely feel that before cold turns into pneumonia, steps need to be taken now,” said Kotak. The need for government and regulatory agencies need to appoint an agency or committee to look into the books of Satyam has been called for by many. 

Kotak also said that Satyam kept its money in current account, which does not earn any interest, instead of deposits. He said that an independent body appointed by the regulators needs to evaluate the accounts and liabilities of Satyam before anyone can look at acquiring the firm.

Kotak also added that shares pledged by the promoters should be made public. This can be one of the implications of the Satyam fiasco if SEBI plans to make this a policy for all the listed firms. If shares pledged by the promoters are disclosed, a rival promoter can conspire to hammer the company’s stock, which can lead to lenders selling the shares. The rival promoter can then go on to purchase the hammered stock, thus increasing his holding in the company and leading to fall in the promoters stake.


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Uday Kotak: Auditors, Bankers, Lawyers Need To Be More Accountable

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