Knitting Indian SOX

The Satyam debacle has made it apparent that corporate fraud, one of the darkest sides of capitalism, knows neither national nor cultural boundaries. Financial trickery of massive proportions, engineered in the highest of corporate offices, is not something restricted to the countries of the West. In hindsight, did the financial devastation wrought by the frauds at companies such as Enron and WorldCom in the US during the early 2000s prompt questions in India of Could this happen here? and What should we do to prevent it? If such questions were raised, apparently little was done, legislatively or otherwise, as the Satyam saga has so blatantly proven.

What does it take for a public company to function properly, in the best interests of the shareholders and, indeed, all stakeholders? What are the checks and balances necessary to counter greed and opportunism by the management? The answer lies in sound corporate governance, which can be thought of as a four-legged stool: corporate management as the first leg, the board of directors representing the second leg, internal auditors the third leg, and finally the independent (external) auditor as the fourth leg. It is almost pointless to argue about which of these four legs is more important than the others, for each must function honestly and efficiently in order for the system to work.