Consumerism and Frauds in the Offshore IT field
During the initial years of Westernization of Indians, many intellectuals saw the world as an undivided humanity that knows no barrier or religion, race, class, and nationality (Datta, 2003). Enduring many invasions through ages, the Indian had a broad and inclusive concept of world that emphasized amongst so many religions what we had was one among many religion. Rabindranath Tagore, the Nobel Laureate in Literature from Bengal, captured this essential oneness of mankind and visualized a universal man in Indian philosophy in his famous Nobel-winning Gitanjali:
“When one knows thee, then alien there in none,
Then no door is shut. Oh, grant me my prayer that
I may never lose the bliss of the touch of the one
In the play of the many.”
Off late due to increased westernization from 80’s, many religious gurus are professing faith in neo-liberalism that includes market fundamentalism, consumerism, welfare retrenchment, and liberal governance, away from Gandhi’s idea of Hindu economics. These revivalist gurus are professing a mix of economic efficiency, ambitious individualism beyond the traditional Hindu society, selfish narcissism, acquisitiveness and excessive materialism for their followers that are taking over the traditional Hindu ethos of toleration and equilibrium in public life. This new culture is feeding the consumer culture and exploiting the traditional Hindu ethos for the sake of new technocratic global-consumer middle class concentrated in few cities.
The Indian people had firsthand experience of this new naked commercialization where huge amounts of money was lost in the bubble busts after bull runs aided by mass hysteria without taking the operating P/E of the sectors into consideration. The new consumer class that is getting huge flows of capital from West, when examined closely, appear both self-centered and riven by paradoxes, seeking validation for their lives from Hindu evangelist gurus even as they acquire the latest consumer gadgets. At the same time this group hasn’t taken the mantle of leadership in religion-socio-economic development, and when compared to similar groups in China or Japan or Korea, they have a reputation for creating chaos and confusion. (Deb)
This dichotomy in daily ethos among these new adherents of the urban revivalist agenda has created vast number of problems for an average Indian. The neo-liberal professors of this movement such as Subramanya Swamy have paid a nominal lip service to the vast population groups in the country while vocally professing their god given rights for the unbridled consumerism that has sees no responsibility. Some of these new jingoist adherents have identified a caste-superiority based logic in placid Hindu society that legitimizes their dominant position in High-Technology directorships, in Corporate world, in Faculty positions and in Government positions . Researchers have found that the vast masses at the base of the Indian economic pyramid are also affected by the spread of consumer culture. “Increasing desires to consume branded goods that are advertised through television is …a consistent and recurring theme.” Moreover, “intertwined cultural processes of conspicuous consumption, normative change [imposing a link between consumer goods and morality], and [interpersonal] competition” mark narratives of low caste Indian consumers. They reflect an increasingly consumerist content of Indian media that depicts the mythic lifestyles of the rich and famous. (Belk, 2008)
For example, during the High technology growth of Hyderabad in 2000’s, this new revivalist mafia tried to hijack the technology growth for their own selfish purpose while locking the vast sections of the population in their flawed pyramid of the new-liberal agenda. The case of Satyam computers highlight the nefarious potential of loose-canons that would burst the high-technology growth (only among Indians). The fraud committed by the founders of Satyam is a testament to the fact that “the science of conduct” is swayed in large by neo-liberal agenda, ambition/greed, and hunger for power, money, fame and glory. Satyam fraud spurred the government of India to tighten CG norms to prevent recurrence of similar frauds in the near future. The government took prompt actions to protect the interest of the investors and safeguard the credibility of India and the nation’s image across the world. If the government didn’t take action in time the scandal had the potential to spiral into mass hysteria that would have jeopardized the entire IT sector that employed 2.5 million people around that 2009.
Satyam fraud details
From being India’s IT “crown jewel” and the country’s “fourth largest” company with high-profile customers, the outsourcing firm Satyam Computers has become embroiled in the nation’s biggest corporate scam in living memory (Bhasin, 2009)
Satyam ownership model was flawed from the perspective of good corporate governance. There may be three factors responsible for this. The factors are not the causes of global and colossal fraud, but they provide an enabling environment for abuse and delusion.
- First, being a publicly owned company, Satyam could raise capital inexpensively if its existing shareholders assigned it a high value. Hence, in order to attract capital from public, it was under pressure to overstate profits to keep the company’s bonds and equities in high esteem. The promoters formed informal partnerships with this neo-liberal mafia all over the world targeting the Hindu temples, Christian and Muslim groups to develop a profitable relationship in the High-Technology sector based on false promises.
- Second, the promoter of the company, Mr. B. Ramalinga Raju, owned a very small fraction of the ownership stock. He diluted his holding from 25.6 % in 2001 to 3.6 % in 2009. He could overstate profits with the objective of influencing other shareholders. This ensured that the whole operation was risk free for the Owners in case of volatility in the IT sector.
- Third important factor for flawed ownership model may be, Satyam could preserve its fictitious profits without having to pay big taxes because its profits were protected significantly from the normal tax laws. They do not pay taxes on fictitious revenues and 22 profits. There are no penalties. The belief that exempting firms such as Satyam from service tax and corporate income tax will make them competitive is a little ridiculous. Satyam would not have overstated its revenues and profits if it had to back both with real cash. A big part of the blame for the colossal fraud thus belongs to India’s trade and fiscal policy makers who gave an uneven advantage to the neo-liberal technology mafia while ignoring the basic fundamentals of the High technology and its impact on the vast reaches of the population.
The owners maintained a consumer relation with the neo-liberal mafia over the period of 2 decades and won numerous corporate awards all recommended by this mafia. In 2007, Ernst & Young awarded Mr. Raju with the ‘Entrepreneur of the Year’ award. On April 14, 2008, Satyam won awards from MZ Consult’s for being a ‘leader in India in CG and accountability’. In September 2008, the World Council for Corporate Governance awarded Satyam with the ‘Global Peacock Award’ for global excellence in corporate accountability”. The company provided vast sums of money to this neo-liberal mafia by funding many higher education institutes such as IIIT, CCMB etc… thereby ensuring and addicting to consumerism the placid Hindu masses.
The promoters successfully cashed out of the company in an immoral relationship with the neo-liberal mafia over the period of 10 years. The cashed money was used in funding the real-estate companies and the socio-educational entities that would support this neo-liberal agenda and in future lay the foundations of the political takeover of the State governments. The owners were successful in creating a huge network of bogus companies that catered to this neo-liberals while systematically subjugating the vast populations to the consumerism. The owners of Satyam in an unethical relationship with this neo-liberal mafia wrongfully tried to influence fiscal and monetary policy of the Southern States by systematically taking over the social, agricultural, financial, educational, governmental, and meteorological aspects of the morbid agrarian population using an aggressive socio-economic agenda that created a new ecosystem of these fraud companies. The idea was to take over the top positions in the corporate, financial, judicial, religious and political eco-sphere of this new ecosystem.
The government acted swiftly by arresting numerous managers for Income Tax evasion and the directors on numerous criminal charges. However the promoters of Satyam were able to show accounting fraud and go to prison while the neo-liberal mafia behind the company is free.
Requirement for newer controls
However this episode highlights the lack of controls at the government level on managing the IT growth and the neo-liberal mafia. The neo-liberal mafia was successful in promoting Mr. Raju as the poster boy of IT revolution and got an international audience with likes of Bill Gates, Bill Clinton, Hillary Clinton etc.. and subsequently benefited in the western countries such as United States and Canada by monopolizing many jobs in number of sectors.
The limits and responsibilities of operating a IT company catering to rich western clients were not defined properly in the existing company law. This is high-time the bureaucrats open their eye to this new pyramid scheme wrecking havoc on the age-old society in India. There should be harsher criminal punishments for people caught manipulating socio-political-economic environment for selfish greed.
Belk, V. a. (2008). Weaving a web: subaltern consumers, rising consumer culture, and television. Sage.
Bhasin, M. L. (2009). Creative Accounting Practices at Satyam Computers. Creative Commons Attribution 4.0 .
Datta, S. (2003). W (h) ither Indian Mind . IJT.