New Delhi, Jan 13: Expressing concern over the Satyam Computer Services scandal, analysts have said that it has exposed serious shortfalls in corporate governance in India, and added that this must be addressed to ensure credibility in an increasingly globalised and competitive world.

Just three months ago, Satyam Computer Services received the Golden Peacock Award from a group of Indian directors for excellence in corporate governance.

Now, its board is in turmoil and its shares have plunged after a botched attempt to buy two infrastructure firms, in which the management held high stakes, sparking off concerns about conflicts of interest and a lack of transparency.

According to the analysts, this sordid saga exposes serious shortfalls in corporate transparency in India.

"How you bring about transparency in the accounting process of a company. How to restore the faith of the investors in all the IT companies especially in this case, if not the entire corporate sector. So far as accounting is concerned, it is not unknown to anybody that some manipulation of accounts is always there in any corporate sector. So it is a question of whether you call it manipulation or you call planning, it is a matter of interpretation," said Ajay Thakur, a lawyer.

"But those things are there, but it is for the investigators and independent authorities to ensure that nothing of that sort happens which sends a negative signal to the world at large," added Thakur.

The incidents highlight loose market regulations, especially in developing countries. It could prompt investors to be more cautious on stock picks even as they battle with the fallout from the worst financial crisis in a generation.

The scope and seriousness of the fraud in the Satyam has prompted the government to intervene to keep the company with 53,000 employees afloat and has taken measures for setting up a new board of directors after sacking the existing one.

Allaying fears that the incident could cast a shadow over India''s IT industry as whole, Amit Mitra, Secretary General of the Federation Of Indian Chambers Of Commerce and Industry (FICCI), said, "I don''t see any reason why India''s IT trajectory and the kind of confidence India has given to it in any way will be retracted."

Satyam says it adhered to corporate governance rules, appointing the requisite number of independent directors with excellent credentials, including the dean of a top business school in its hometown of Hyderabad and a professor at Harvard business school.

But there are concerns that some directors may have been too close to Satyam''s founder chairman Ramalinga Raju to be considered truly independent.

Regulators in India are investigating into how and why Raju was able to fool auditors and investors for several years. India''s market regulator, the Securities and Exchange Board of India (SEBI), and the Criminal Investigation Department (CID) of the state police have began investigations.

"If you are a director you are responsible for the affairs of the company. Independent directors are there to ensure that what is going on inside the company, who are the persons who are controller of the affairs of the company. So it is their responsibility as well to ensure that whatever is going on should be as per law," Thakur said.

"But in this case, and it''s unfortunate that auditors are also a party to this. So in order to detect such crime at the initial stage may be difficult for an independent person who doesn''t have an accounting background, because accounts can only be understood by a person who has an accounting background," added Thakur.

Some analysts say the SEBI lacks the teeth for ensuring compliance on governance, while others say the rules don''t go far enough.

In the case of independent directors, the SEBI mandates. they must make up one-third of a board where the chairman is a non-executive director, and half the board where the chairman is an executive director. (ANI)