India's Enron

The biggest news in the Indian headlines these last few days has been the Satyam Computer Services Ltd. scandal. The chairman and founder of the company, Ramalinga Raju, has admitted to years of accounting fraud at their company, including claiming that $1 billion of its cash actually did not exist. After hiding out in Hyderabad, he was arrested.

This news has hit ISB pretty directly; the Dean of ISB, Rammohan Rao, resigned from his post as Dean because he felt partly responsible as a member of the Satyam board of directors. Faculty and students seemed very disappointed by this news, because apparently Dean Rao has been a very popular one. Most seem to credit Rao with having increased ISB's visibility and bringing them into the Financial Times's Top 20 Global MBAs school list, and noted that he took his role as ISB Dean first above other responsibilities - meaning that he actually took the Satyam seat to help aid ISB's growth.

The news also seems to worry ISB students because they are all currently working on "placements" = recruiting for jobs after graduation. With the economic downturn, jobs are more limited already, and some seem to worry that the Satyam scandal will affect job growth in India. Another point that has been interesting is one newspaper headline that we saw - it stated the India's edge over China (regarding ethical behavior) has been compromised with Satyam's news. This lead Grantland to wonder if most Indian students regard China as one their biggest global competitor, to which one of my student buddies replied yes, China along with other growth Asian countries, such as Singapore, when asked.

It also remains to be seen what happens to Pricewaterhouse Coopers, who were the auditors of the company. But I don't expect that they will fold like Arthur Andersen did, since Satyam is mostly contained to India (though some U.S. companies who have Satyam interests are suing, I've read). I also bet that there will be new rules and regulations soon to be passed, just as Sarbanes-Oxley was after Enron, and on a more familiar level to me, new emphasis on ethics classes and cases in MBA courses.