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(A)Sathyam Fiasco: Ramalinga Raju is More Efficient than the Lakshar-e-Taiba

Discussion in 'Wednesdays with Varalotti' started by varalotti, Jan 8, 2009.

  1. varalotti

    varalotti IL Hall of Fame

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    Hi Amrita,

    You are most welcome.

    I also share your concerns for the employees. In fact in the whole episode that's my only concern.

    But here we should note one important feature. In those days the salaries were very low. So employment did not carry any risk. I don't have any shame in admitting that my starting salary in a big company in 1982 was just Rs.1200. And the boss told me that he was paying "this much" because I had completed CA in the first attempt and was placed 5th in the country. With a salary like that we did not have any job risks. Even at that time my company's turn over was a few hundreds of crores. And if I am terminated the company will save only Rs. 14,400 per year. Peanuts for them.
    But today salary cost as a percentage of the total revenue has gone up tremendously. For software companies that's the major cost. So with the importance comes the risk. Anything happens to the company or the market, the first set to be affected is the employees.

    But what happened in Satyam is a kind of betrayal. But for the fudging the company would have easily survived the meltdown and the employees would have sailed through the tough times. Now one man's dishonesty has made life harder for 53000 honest, hard-working employees.

    Let's see. I have posted the latest developments. Looks like all hopes are not lost.

    Savings has always remained an obscene word for the IT people. 'How could we save?' - many people have asked me. If your salary is just 30,000 instead of 60,000 what will you do? Will you starve? No, you will have had a decent life style even then. So an IT employee in Satyam whose salary is 60 k per month, who saves Rs. 30 k per month for the past lets say 5 years, will have Rs. 18 lakhs plus interest about Rs. 4 lakhs assuming it is in a bank. With 22 lakhs if his job goes now, he could have survived at the same Rs.30,000 per month life style for 6 years even without working for a single day. But what is required to hold yourself for 6 months at the maximum within which time you will get another job.

    At least from now on let's learn to save for a rainy day. I tell you Amrita, for the software industry, the rainy season has started and we will have to be even more careful.

    sorry, if I had taken too much liberties.

    love,
    sridhar
     
  2. Malyatha

    Malyatha Gold IL'ite

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    Mr. Sridhar,

    I agree with you that savings should be an integral part of one's life. In fact, I would even say that it should be as natural to save as it is to breathe, eat and live.

    Where I disagreed with one of your previous posts was were I thought (and I might have misunderstood your message) you were saying that people should not enjoy a higher standard of life just because they were earning more. I refer specifically to your post about the IT guy who purchased clothing worth Rs. 4000. For some people, Rs. 4000 might seem to be an exorbitant sum of money. But, for others, this might be even 'normal' or 'average'. This, of course, depends on your take-home pay. It might seem - to an outsider - that an IT guy or girl is burning a hole in his or her pocket when the truth might be that their paycheck is such that they can AFFORD to spend a lot more than the "regular Joe" EVEN AFTER saving a large part of that check.

    Moreover, with rise in stature, comes an increase in expectations from friends, relatives and colleague. One of my brothers is in senior management in a top IT company. He has to regularly take his clients out to lunches and dinners, and in addition, throw lavish parties routinely. While his company does pay for these, the fact remains that *he* has to act the part of a successful business manager - which involves wearing high-end clothes, driving a high-end car, living in a high-end part of town etc - for none of which he is compensated by his employer. His wife, who plays hostess at many of these corporate parties, has to act that role to perfection, as well. More $$$$ (or Rs. Rs. Rs. Rs.) down the drain. It is very naive to expect a senior management guy or girl to live like a "regular Joe" when s/he has all of these added expectations to fulfill. If they do not dress, act - nay even LIVE that part - their clients, colleagues, and even their own bosses may not believe in their ability to produce for their employer. It is a sad truth that our appearances and external paraphernalia often go a long way in conveying the 'right' impression about us to those around us.

    Youngsters learn the hard way. A fresher who suddenly sees thousands of rupees every month after living a spartan student life will naturally be inclined to indulge himself or herself. Ilam kandru bayam ariyathu. With time, age and responsibilities, they will eventually learn that life isn't just one long party but a mixture of the good, the bad and the downright ugly. Condemning our youngsters for enjoying themselves - before marriage and familial responsibilities take over - is unfair to these people. Similarly, blaming IT people for jacking up costs is unfair to them.

    My 'vayatherichal' theory comes after watching a show on a popular TV channel where one (non-IT) man told the audience that he celebrated IT recession with crackers and sweets! It is THESE people that I refer to. It is unfortunate that these "nouveau riche" are easy targets of unbridled envy from those that aren't doing as well for themselves. IMO, IT-ians should not be ashamed to spend lavishly IF they can afford to do so AFTER their bills have been paid and after a portion of these earnings has been put away for a rainy day. It is unfortunate that the IT boom spiraled land and other prices out of control, but we are shooting the wrong party. We should be blaming market forces, and its movers and shakers (builders, developers, salespeople etc) for rising prices and out-of-control costs, rather than merely a segment of our population.
     
    Last edited: Jan 12, 2009
  3. Oviya

    Oviya Silver IL'ite

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    Dear Malyatha,

    Our Lord Ram, considered the ulitmate icon of virtue, had his own frailties. So, we definitely can not expect a scorecard from mortals that betters HIS.

    Our concept of 'greatness', is based on the practical and businesslike advice given approx two thousand years ago, by Thirukural. "Gunam naadi, kutramum naadi avatrul migai naadi mikka kolal'.

    Now regarding the points you have raised,

    1) This Grand daughter in question is not his biological grand daughter. She was adapted by his son (his son's ex-wife's daughter) . Those who know Buffett's take on birth-based privileges ( he calls it the 'Ovarian lottery') understand why he decided to leave 'money large enough for his children that allows them to do anything in life but not enough to do nothing'. He is against 'leaving dyanstic megawealth to one's children'. That probably explains why his contribution to charity is by far the largest in the history of human kind. For any one with such a mindset, it is hard to tolerate a biological grand daughter (leave alone an adapted one) who is using the family name, instead of merit, to further her interests. In his opinion she was doing it. Hence he cut her off.

    2) Regarding Buffett's philosophy of investment, it is not a closely guarded secret. He has been discussing that philosophy in his letters to his partners and shareholders for more than 40 years. People mistakenly
    assume that there is a simple or magical formula that can be programmed in a computer that will give them the results. There is none. It requires understanding businesses and their management, and looking for an opportunity to buy them when the price is insanely low or fair. To decide these three factors requires tremendous knowledge of human nature and business economics.

    If you want to know more about his investing secret you may get a copy of "Essays of Warren Buffett: Lessons to Corporate America" for about $25-30.

    In any case, we are discussing things that are not fully relevant to this thread. Now that I have answered your questions let us discuss any further doubts you may have, elsewhere (PM, for instance).
     
  4. Malyatha

    Malyatha Gold IL'ite

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    See, as far as I am concerned, there is no difference between a biological child (or grandchild) and an adopted one. My issue is not even that he didn't leave her any money - no one is entitled to inherit anything, even from our parents. By "cut off", I meant his emotional distancing from, and extreme coldness to, someone who was previously a very close and much loved grandchild. That has hurt Nicole Buffett tremendously. And who could expect otherwise? This was an unexpected coldness from a grandparent that was previously warm and loving. This would have hurt ANYONE, including me if I had been in her shoes.

    To demonstrate just how callous his distancing from her was, Buffett's now-deceased wife's will specifically refers to Nicole as a "much beloved grand-daughter" and Buffett himself has apparently told the girl how proud "her grandmother & I are of her achievements". And all of a sudden, he cuts her out, including telling her that he NEVER considered her a grandchild, simply because he PERCEIVES that she is misusing the family name and furthering her own agenda? Why couldn't he give her a chance to "redeem" herself (even if she had committed a MAJOR faux pas)?

    To me, oru paanai sothuku, oru soru padam. This one incident shows the coldness that this man is capable of and how indifferent he can be to the pain he KNOWINGLY causes. I cannot forgive that of anyone - including my own parents - not that I am anyone of consequence or that Buffett cares what I think of him.

    I further do not agree with you that he does not believe in "ovarian lotteries". He left EACH of his child USD 1 BILLION as inheritance. To me, THAT is mega-wealth, even if it is simply "loose change" by Buffett's own standards. My angst at his being considered "great" is because of his hurtfulness to a young girl who had no idea that he would perceive her actions in such a negative light.

    Even his son, the girl's father, reacted to Buffett's cruel cut off of his daughter by saying that "a leopard cannot change its spots". That speaks VOLUMES regarding Buffett's character (which only those very close to him will know with certainty). And, since the cut off, he has purposely gone out of his way to shower gifts on his other grandkids, ostensibly to teach this particular one a sharp lesson, and to reward the others for "toeing his line".

    This is ONE known example of this man's callousness. Oru therintha "kutram". Who knows how many others he has hurt along the way, in the course of his life and business? I understand that he has shown good "gunam" by donating heavily to charities but that does not negate his "kutrams" esp. since we will never know of all of them!

    Thanks for sharing that info. And by "philosophy", I do not mean the broad generalities but the specifics of his stock picking strategies. I have dabbled in the market enough to no that there is NO magic formula or a cookie cutter method for picking winners. But, I am no expert and would love to learn more from those that are.

    Of course, it is WELL within his rights to guard his "trade secrets". I am aware of his "be fearful when others are greedy and be greedy when others are fearful" take on stock picking. What I would like is more specific info on what separates a good buy from a great one... KWIM? I will go through that book to see if it answers some of my questions and curiosity. Thank you again for sharing.
     
    Last edited: Jan 12, 2009
  5. varalotti

    varalotti IL Hall of Fame

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    My Dear DD,
    Thanks a lot for beautifying this thread with that wonderful post. Call it an accountant's bias or an Indian's jaundiced view, somehow I am not that comfortable with Buffet. I first gathered some points in that direction but did not want to change the direction of this thread from Satyam's employees in to Buffet vs Murthy case.
    But someday I would love to discuss more on this very crucial issue.

    Let me congratulate you once again on the elegant post.
    love,
    Your SriPa
     
  6. varalotti

    varalotti IL Hall of Fame

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    Dear Bhuvana,
    I salute the compassion in you of offering to help those who are in distress.

    But thankfully a new board has been constituted consisting all eminent people - a first class banker, a world-class chartered accountant and an ex Regulator and the former head of India's post powerful IT Association, the one and only NASSCOM.

    We should pray that there are no more skeletons hidden in the closets of the Rajus. If it is just this overstatement and Rs. 7000 crores, yes, with the Government's full support (The Prime Minister has been briefed of this problem and the Directors are discussing with the Minister For Corporate Affairs every now and then) and the new Board members, Satyam can come out unscathed minus the tainted Rajus.

    I only wish that there were some kind of an association for the Satyam employees. If they could find out a leader among themselves and represent their interests to the new Board, it will be fine. If there are any Satyamites reading this thread, please discuss this with your colleagues.

    It is important to punish Raju and the auditors. But it is even more important to protect the interests of the employees. Let's just keep our hands folded in prayer.

    Thanks once again, Bhuvana. I am moved by the compassion you brought to the table.

    love,
    sridhar

     
  7. varalotti

    varalotti IL Hall of Fame

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    Thanks, Vahee. If only our employees in all the fields build up financial strength they can easily bargain with their prospective employers for better salaries. But more importantly they can sail through a crisis like this unscathed.
    Come, Vahee, lets pray for those 53000 plus young, brilliant minds who contributed to our national economy.
    love,
    sridhar
     
  8. varalotti

    varalotti IL Hall of Fame

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    Dear Usha,
    thanks a lot for joining us. In fact only yesterday I got the full details of the modus operandi of the fraud. Please read my reply to Induslady where I have given a 'blow by blow' account of the happenings. As a chartered accountant you should know how this happened and I would even suggest that you share this with Mr.Krishnan. The CFO with whom I talked yesterday told me that every software company does some "minor fudging" in as much they overstate the degree of completion of the ongoing projects. But nobody goes to the extent of forging bank statements and the like.
    One feature I have noticed in all the big firms. With the small, medium-sized relatively unknown clients, they show all their might. But before large elephants like Enron, Worldcomm or Satyam, they become their lap-dogs.

    It was only on your suggestion that I posted developments on this issue in a separate post in this thread.
    love,
    sridhar
     
  9. varalotti

    varalotti IL Hall of Fame

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    Dear Malathi,
    Thanks for joining us here. When I look at the IT employees I see them as my kids - more as spoilt kids, but my kids nevertheless. That was the reason I took two extreme steps:
    1) break my three year vow not to write anything about my profession and
    2) offer unsolicited financial advice (I am referring to the 60-40 advice) something I have never done.

    More laws and tighter regulations would only have a nuisance effect on the good and the innocent. You know after the 9/11 attack airport security was tightened requiring all bona fide passengers to come an hour earlier than the usual time.

    More regulations will mean an increase in the compliance cost and more work for people like us. In India the problem we have is too many laws and too little enforcement.

    I am happy that you were able to go to the book fair and buy Jiddu's books. My dear friend I am afraid you may have to go again. You haven't got two of my newest books the one on Obama and the other a novel in tamil, Azhage Unnai Arathikkiren. Love All 8 contains all the details regarding the release of books. You can also see Marimuthu, a character in ALS.

    Thanks once again, Malathi.
    love,
    sridhar
     
  10. varalotti

    varalotti IL Hall of Fame

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    Ms Malyatha,

    I am really happy and relieved that you have understood me. Let me be frank. I always see IT people as my kids. In fact my daughter works for an IT company. She's in HR.

    But, Malyatha, I am afraid many of the kids act like spoilt kids. Lavishing money on luxuries, not saving anything, borrowing on the top of their high earnings.

    You are very right about people's expectations from the high-end staff. As a writer and a socially conscious man, I want to tell you that those expectations are fundamentally wrong and in the past have ruined many people. Those "expectations" things are at the heart of 'keeping up with the joneses' theory.

    I am not a prude, Malyatha. I am not saying you should not party or freak out once in a while. But as an accountant I would always insist that you keep a count of it. Budget it. eg In the month of January I won't spend more than 5000 for parties. And mercilessly adhere to it.

    I was concerned about the IT kid who shopped in my presence in Big Bazaar in Bangalore not because he bought T shirts for 4k. It was not even because I could not afford that much. By God's grace I could afford to buy the entire section with one cheque. That's not the point. The point is the total mindlessness with which about 8 T shirts of similar design were bought. I am sure he was not going to use all of them during the next six or eight months.

    That brings my mind to one more question which Paulo Coelho calls it almost spiritual. Let every IT kid look in to her wardrobe and see how many dresses have not been touched for months on end. How many gadgets have not been used for months on end. That will give an idea of the wastage.

    As a senior man (I am completing 51 this April) as a father (remember my daughter is in IT) as a writer and as your friend, I would suggest to all the kids in IT, bring down your profile. Spend less. There is no need to keep up with the joneses. The party may be over any time. Or there may be sudden disturbances like what happened in Satyam. Be prepared for it.

    Not only I don't belong to the vayatherichal class, I love the IT people because it is thanks to them that salary in the other sectors have gone up. You know in Madurai, some businessmen are seriously blocking the entry of IT companies. Reason: "If those people come, our salary bills will go up by more than 40% wiping away all our profits."
    I salute you guys for putting this kind of fear in the hearts of the greedy, exploitative and avaricous businessmen.
    What I tell you now is with all the affection of a father, 'Take care. Good times might not be for ever.'
    love,
    sridhar
     

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