Satyam's new CEO: asset or liability

Posted by: Manjeet Krpalani on February 6, 2009

On Feb 5, A.S. Murthy, a Satyam veteran of 15 years, was appointed by the government-constituted board as the new chief executive of the beleagured company. The announcement was made at the fifth board meeting held on Feb 5 in Hyderabad, the company’s head quarters. Murthy said he would “restore Satyam to its well-deserved glory.”

But the reaction to his appointment was not so positive. The next morning, Feb 6, was full of stories about Murthy having off-loaded 40,000 shares of Satyam worth $185,000 between Dec 12 and Dec 16 - the latter being the day Satyam’s ill-conceived merger with a related real estate company was aborted by angry shareholders. Former Satyam employees said that Murthy was an acolyte of disgraced founder Ramalinga Raju – currently in jail – who never made a move without consulting Raju. Reports in local blogs recount statements made by Murthy, who as a former head of human resources at Satyam passed derogatory remarks about women – how women over 30 get complacent at work, that single women’s ‘anxiety’ causes concern, that divorced women create ‘problems’ and ‘family women’ fit in better, etc.

Analysts I talked to this week said they were waiting for Satyam’s chief executive and chief financial officer to be appointed before they would consider restarting coverage of the company. But the announcement of Murthy at the head of Satyam has been disappointing. Murthy was an “ineffective head of HR,” said one. For Satyam, what’s needed is “respectability, someone who can say is a good man.”

The board is solidly behind Murthy, and they will need to keep their faith. The Indian IT industry is going through one of its hardest periods, with major clients particularly those in the financial services sector in the US facing their worst times. A scandal-ridden IT player is an opportunity to bow out of contracts, and two of Satyam’s clients already have – State Farm withdrew from its contract with Satyam last week, as did National Australia bank this week. Other tony names like Nestle and Coca Cola are reviewing the situation while GE and Cisco say they are considering “alternate solutions.”

Reader Comments

Jalal Alamgir

February 8, 2009 6:18 PM

The new CEO needs to show extreme transparency and over-communicate expectations, strategies, and results to begin to restore confidence. Satyam will also need several spokespersons who communicate and bolster the key messages in order to show that it is not overly dominated by a single person. It may want to also look into Cisco's model of empowering and using committees instead of the traditional corporate hierarchy.

Jalal Alamgir, Ph.D.
Red Bridge Strategy, Inc.
http://www.redbridgestrategy.com

Bob

February 8, 2009 11:54 PM

American financial service companies that received goverment assistance should NOT and will NOT be allowed to outsource IT work to India. USA needs all those jobs back.

PPR

February 9, 2009 7:10 AM

Mr.BOB i suggest you to not be conservative minded. Do you think all American IT companies are foolish to outsource their jobs to India..? By outsourcing some jobs to cheaper countries like India these American companies will save billions of dollars.If you think that all IT jobs from India should come back to US then, what about companies selling American products in India ? - Coco-cola,Pepsi,Boeing,Uni liver, GE,Nuclear energy,Military weapons....Why should India buy products with America..?,there are other countries who are keen to do business with India so, Protectionism is not the solution. Globalization means not only doing business globally but also exchange knowledge,goods with other countries.

Ashank

February 9, 2009 7:59 AM

I don't think Satyam issue is a reflection on outsourcing IT work to India or other cheaper destinations. We are mixing up two entirely different issues.

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