ACS: Satyam scandal highlights need for strong corporate governance

The Australian Computer Society has called for a stronger focus on corporate governance and professionalism within Australia’s ICT community

The Satyam scandal and ongoing global financial crisis has spurred the Australian Computer Society (ACS) to call for a stronger focus on corporate governance and professionalism within Australia’s ICT community.

ACS CEO, Kim Denham, said corporate governance regulations had been on the agenda for governments and industry for a number of years. As a consequence of issues seen around the world since the collapse of US energy company, Enron (also due to false financial reporting), it was appropriate that this scrutiny and control tightening continues in light of the Satyam scandal, Denham said.

Indian outsourcer, Satyam Computer Services, is embroiled in controversy after the company’s chairman admitted to falsely inflating financial results for several years. Satyam has attempted to reassure customers and investors that it will remain afloat. The Indian Government has appointed a new board that has since hired an accounting firm to restate its financial standing.

“The ACS would like to see the Government introducing improved corporate governance standards for local operations with overseas parent companies, so that impact on Australians is minimised,” Denham said.

Australia’s sophisticated ICT sector, highly skilled workforce, transparent Government and robust legal and corporate governance systems made it an attractive destination for companies looking to offshore here, he said.

However, with increasing significance put on profitability, ROI and stock market performance, Denham cautioned against letting corporate governance fall by the way side.

“To promote Australia as a very high trust destination we need to make sure that in times when it’s really tough, like now, we have a system and various models in order for us to further strengthen our position,” she said.

Denham warned that it was important companies didn’t jump on the cost-cutting bandwagon, or retract any offshore plans without weighing up all the factors.

“What we need to see however, is a balance between risk management and an ongoing level of innovation and expansive thinking… professionalism and accreditation is the best form of risk management – it demonstrates the strength of our ICT sector and builds trust within relationships,” she said.

Denham said that based on the potential sudden loss of confidence in offshore outsourcers, local companies may see opportunities open up. However, analysts have expressed mixed opinions over whether the Satyam scandal would create opportunities for Australian companies against their multinational counterparts.

“While the recent corporate governance failure of Satyam Computers will have an impact on business confidence of offshore companies, there’s no turning the clock back on globalisation. Outsourcing and offshoring is a reality of our industry,” Denham said.

“We expect some of the corporate failures we’ve seen in the past few months are going to lead to a healthy degree of scrutiny of corporate governance of both offshore and onshore companies in the ICT sector.”

Satyam employs about 1500 Australian and New Zealand workers. The ACS provides current and future employment advice to those that are members of the group.

“At this time we would suggest that these workers in Australia focus on professionally delivering the services to their clients to ensure their value is not diminished in the current circumstances,” Denham said.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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