What should Satyam and Raju do?

The aborted attempt to acquire two companies promoted by Satyam Computer Services Ltd’s chairman’s family have resulted in a significant loss of face for the company. The deal would have benefited chairman Ramalinga Raju’s family at the expense of minority shareholders.

Analysts and fund managers protested against the move in a Tuesday call with the company, and investors battered the company’s stock on Wednesday even after Satyam pulled the plug on the acquisitions, and while the stock regained some lost ground on Thursday, the company’s image has taken a beating. In an attempt to placate analysts, fund managers and shareholders—some are asking the company to pay out its reserves as dividend, and a few have asked for a change in the senior management—Satyam announced that its board is meeting a consider a share buy-back, but the company will have to do a lot more.

Don’t cover up; admit, explain

Founder CEO, Nobby Brand Architects & Strategic Marketing Consultants

There is no denying the fact that they have shot themselves in the foot. Their decision has caused irreparable damage to their brand equity. In a service industry, trust is a very important component that builds brand equity. With their action and inaction, they have shaken shareholders, customers, employees and investors who had no knowledge of the developments till they saw the news. While one can damage a trust position quickly, rebuilding it takes a long time. The company should have had the foresight to know the repercussions of this decision.

Now, they first need to explain why they did it. If there was a strong internal reason—(the deal) seems to be in their family’s interest—they have to admit that they slipped. That kind of admission takes a lot of strength.

The idea is not to try and cover up what they have done but to explain and be transparent. They also need to be more active and transparent with their internal customers, employees, because they are the ones who deal with external customers.

Will have to move the goalpost
Dilip Cherian
Consulting partner, Perfect Relations Pvt. Ltd, a New Delhi-based public relations firm
The real option for Raju is to be able to initiate and then sustain a campaign that shows his move to be truly visionary.
If he can project a unified and visionary image for Satyam 2020, he will not have to prove anything in the short run. It is what we call moving the goalpost.

They have done the first thing right. They have been quick to correct their mistake rather than letting it fester. So, the mistake has been reversed.
The question as a whole is whether the promoters’ self interest has taken precedence over shareholder interest. How committed is Satyam to its shareholders? The whole issue is that of credibility.
Sometimes, you can retrieve a one-time error as an error in judgement. But a perceived error in intent is difficult to retrieve. The company will then be looked at through a filter of suspicion.
Satyam, therefore, needs to take a series of actions that reassure shareholders that it is a one-time error in judgement. It will take a consistent set of actions over a sustained period of time to convince stakeholders that the problem is not with their intent.
The one thing they should not do is over-explain themselves. They should move on and focus on the next significant action, which will speak louder than the first.

M. Unni Krishnan

Managing director,

Brand Finance Plc., a UK-based brand valuation consultancy

To start off, they do have their knickers in a twist. Satyam did have the presence of mind to call it off. Therefore, we need to give them credit for correcting their mistake. The damage to their reputation will, however, take a while to reverse. Satyam has always been bunched up in the same league as some of the top blue-chip companies such as Infosys, TCS and Wipro. These are all companies that are known for their strong corporate governance. Having fallen from grace and this peer set, the key issue is how to get back into that league again. It is going to be a very tough task. Even their core IT business will have to work very hard to recapture the lost ground. With the kind of shareholder activism we have witnessed, companies have to be very careful about their reputation, as it could vaporize overnight. As for what Satyam should do now, part one of the story is done. They have reversed the deal. Now, they have to take steps to reinforce trust and credibility. Their actions will have to speak as words will be discounted very quickly.