Satyam has been big news for the last few days. Certainly the news has been disturbing and causes people to pause and think; as it should.
This certainly wasn't the first and unfortunately, is not ikely to be the last apparent corporate governance failing. In fact, in the last few weeks alone, we've had Wipro join the news and prior to that, the much bigger issue of Bernard Madoff.
To me, what this tells us is that rules alone are not sufficient. Demanding that people behave in a morally responsible manner is not sufficient on its own. Auditing corporate results is not sufficient on its own. Rather, we need a systemic set of checks and balances commensurate with the risks that we're exposed to.
In a simple analogy, keeping my doors locked and changing my keys if I sense a possible security breakdown, etc, are prudent measures to reduce the risk of a thief breaking into my house. However, while a higher degree of security is crucial, if I'm protecting nuclear secrets for example, it's seldom worth the cost to be 100 percent ensure that no thief can break into my house.
I suspect that finding that balance will be the real challenge for corporate regulators, company directors and all of us who are part of the global economic system.
Tags: Satyam, Security, Bernard Madoff, Wipro Technologies, auditing, corporate governance, director
Challenge balancing security checks and costs
I suspect that finding that balance will be the real challenge for corporate regulators, company directors and all the stuff of stayam
Posted by Hardik Baldev on Friday, February 06 2009 08:26 PM