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Corporate India needs better boardroom manners

This seems to be a season of turmoil in the boardrooms of corporate India. Recently, three blue-chip companies with commanding market presence and high equity share values have experienced boardroom battles which have resulted in the less-than-dignified exit of their chief executives. And as Indian industry restructures and gears up for new era of competition from within and abroad, more corporate shake-ups and blood-letting are imminent inside the hitherto dormant boardrooms scattered across the country.

Consequently, as corporate India readies for the new era of not-so-civil wars in the marketplace, this is as good a time as any to reflect upon the ways and means to reduce the intensity of conflicts in the boardroom. In this connection, there are some important lessons to be learned from the recent case histories of Asian Paints, Indian Hotels, and the highly successful Indo-Japanese car manufacturing company, Maruti Udyog, in which the government of India is an equal partner with Suzuki Motors.

In the Asian Paints imbroglio, the company's promoter-managing director Atul Choksey suddenly sold almost his entire family shareholding -- 9.1 per cent out of 9.5 per cent -- to ICI (India), a subsidiary of the UK-based transnational which is one of the largest paints manufacturing companies worldwide. The imminent induction of ICI into the boardroom of an Indian company which had consistently got the better of the British multinational's subsidiary in the marketplace, has generated great bitterness among the three other promoter-families who own 40 per cent of the equity of Asian Paints, and in Indian industry in general.

The rules of corporate fair play and loyalty demanded that Atul Choksey should have first offered his shareholding to the other promoter families. But quite obviously, relations between the different promoter-directors of the company had broken down so completely that Choksey defied the tacit agreement that no promoter would sell his shareholding to a foreign company. Now it is only a matter of time before ICI (India) aided by its parent's deep pockets and a favourable rate of exchange takes over India's largest and entirely indigenously developed paints manufacturing and marketing company.

Interpersonal relations had quite obviously broken down to the same or worse extent in the boardroom of the Indian Hotels Company Ltd, the country's largest hotel management company which manages the world-famous Taj Group of Hotels. The well-known and highly-regarded business house of the Tatas, which is the promoter and largest shareholder of IHC, had made grave allegations of financial impropriety and misconduct against Ajit Kerkar, till recently the company's chairman and managing director. This, despite it being common knowledge that in his 27 years as chief executive of IHC, Kerkar engineered (with little help from the Tatas) the metamorphosis of the Taj group from a single property into a globe-girdling chain of over 40 owned and managed hotels.

The transparently obvious purpose of this unseemly blood-letting in the IHC boardroom was that Tata Sons, the holding company of the far-flung Tata business empire, and the Tata group chairman, Ratan Tata in particular, want to rein in the hitherto uniquely autonomous companies of the group. Having already done so with the blue-chip Tata Steel, Tata Chemicals, and Tata Tea (among others), Ratan Tata pulled out all the stops bringing IHC to heel by installing his loyalists in the apex-level positions within the company.

Consequently after forcing the resignation of Kerkar from the position of chairman of the company on September 2, two Ratan loyalists, one with little and the other with limited experience of the hotels and hospitality business, have been appointed managing and deputy managing directors respectively. The qualifications of executive directors of IHC who had been carefully groomed by Kerkar to succeed him have been ignored. This augurs ill for IHC, which is one of the most profitable companies in Indian industry and one which has consistently provided good value to its shareholders.

And thirdly, and the most indefensible, is the raucous wrangle in the boardroom of Maruti Udyog Ltd, the Indo-Japanese car manufacturing company which has an 80 per cent share of the national market for automobiles. There is a sharp and open disagreement between the Suzuki Motor Co and the Union government (both of whom own 50 per cent of the equity in Maruti) over the appointment of R S S L N Bhaskaruddu as the new managing director of Maruti Udyog. Though it is the turn of the government to nominate its choice as MD, Suzuki feels that is should have been consulted. In this case too, the future of another highly successful company is in jeopardy.

Though management purists and pundits might argue that it is not advisable to mix morality with boardroom politics, I beg to differ. The protagonists of these squalid boardroom battles are guilty of the sin of ingratitude which is likely to severely damage the corporate institutions which they are meant to serve and nurture.

Atul Choksey should have acknowledged the contribution of the other promoter-directors who had helped build Asian Paints into a market leader in its lines of business and offered them the right of first refusal. Likewise, the remarkable institution-building efforts of Ajit Kerkar should have been given due recognition and respect. And there is considerable force in the Suzuki argument that the new CEO of Maruti should have been chosen after discussion between the partners of the company.

All over the world, Indians have a poor reputation for their bad manners and rank opportunism. The captains of Indian industry don't seem to be exceptions.