Everonn & Corporate Governance: A Lost Opportunity Yet Again!

While apparently the corruption issue seems to have been addressed in the Everonn case, lot of questions yet to be answered on the corporate governance front.

Post-Satyam, those passionate about corporate governance, though shocked, believed that good lessons will be learned on the governance front. But that was not to be. Recently, corporate governance once again took a hit in the form of Everonn, about which I had written briefly. And it was only ironic that the Everonn issue happened just two days after Anna Hazare and his supporters claimed victory in the movement against corruption in the government circles. As things stand at the time of writing, the whole issue seems to have been put on the backburner. Media was more concerned about the market effect of Everonn and the possible impact on the skill development front rather than governance related issues. Other than that the Chief Vigilance Commissioner(CVC) felt that corporates be brought under the purview of the Jan Lokpal, there was no reaction from the Government, regulatory bodies, industry associations like CII,FICCI etc. Of course, the chairman of the company, Dr.J.J.Irani, a highly respectable professional with impeccable reputation, who once chaired a committee constituted by Department of Company Affairs to evolve a new set of corporate governance guidelines, promptly resigned and the Everonn founder and CEO, Mr.P.Kishore, was removed. The board also appointed Mrs.Susha John, a whole-time director of the company as MD and CEO. On the surface, it looked as if the company acted swiftly to deal with the crisis. Reports from the press said that the board unanimously expressed its confidence in the management and the business and that the company will offer all co-operation to all concerned as necessary to clearly demonstrate its commitment and adherence to principled corporate governance.
While apparently the bribe/ corruption issues seems to have been addressed, there seems to be a number of questions yet to be answered on the corporate governance front. The most pertinent question of them is, what has Everonn board done to uphold the values of better corporate governance in the country? Nothing much at the moment. Of course, the arrival of a new investor, GEMS Education belonging to the Varkeys Group of Dubai , has been touted as an indicator of investor confidence in the company.
Has it all been as simple and business as usual as it tries to convey? A few more questions like the following still linger on needing answers:
a. Mr.Kishore was arrested for bribery. What about governance issue relating to non-disclosure of income to the tune of Rs.116 crores? While the board may say( not fully satisafactorily) that it has acted upon the issue, there have been no reports so far of the regulator(SEBI) making any reference to the issue .
b. Apparently the raid was conducted on Everonn and ( and not on P.Kishore personally).When a raid was conducted on the company by Income Tax(IT) officials, it is very unlikely that the whole-time director and the CFO were not knowing about it and also the reason for the same. And even if it were related to subsidiary companies( there are thirteen of them), the whole-time director must still be aware of the issue as she is on the board of twelve of them, according to the annual report of the company for the year 2010-11.It doesn’t seem to be the case of just one ” rotten apple’.
c. Yet another important question that seeks answer is were the chairman and other directors and the audit committee informed of the IT department raids and the unearthing of the undisclosed income?
d. Was the auditing firm, M/S.P. Chandrasekhar, aware of the undisclosed income? If yes, why did he not report the same to the audit committee and in the remarks on the account? What did the audit committee, board and the regulatory body ICAI do in the case of the auditor, supposedly a gatekeeper?
One would have considered that the values of corporate governance were upheld had Mrs.Susha John & the CFO voluntarily resigned(despite the fact that under Indian Company Law, MD is the designated manager)to facilitate objective enquiry by the board or the board decided to keep Mrs.Susha John & CFO suspended from official duties temporarily till a board enquiry was completed and if found clean, reinstalled later. Dr.Irani also should have stayed back till the board enquiry into the event is over to provide leadership for the company & confidence to the investors and the market. The company is in a crisis and can you run away from it? It will be like the captain deserting the ship caught in a storm. The right time for his resignation would have been when he was informed of the IT raids on the company(if he was). His resignation, while with good intention of guarding his reputation and clean image , will only help create a feeling that selfish motives were overriding the interests of the organization. A courageous and problem solving behavior of the leaders is crucial in such difficult situations and would have become a torch bearer for the future.

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