The omerta followers
India Inc. sees a spate of resignations of independent directors, but mum’s the word for them and company managements.
When quizzed about his reasons for quitting as independent director from the board of Piramalcontrolled real estate developer Peninsula Land, Hemendra Kothari, Chairman, DSP Merrill Lynch, begged off from speaking to BT, citing a busy schedule and business commitments. Of course, he’s not the only one to have quit the board of a company—over 100 independent directors have done so after January 7, 2009, indicating a trend that could be directly related to the fallout of the Satyam scam, where the role of independent directors came under intense scrutiny.
“It would be wrong to associate Kothari’s resignation with the Satyam scam. He had already indicated his intention to leave the board in October 2008 due to his own professional commitments,” contests Rajeev Piramal, Vice Chairman, Peninsula Land. Perhaps, as Piramal asserts, the timing of Kothari’s resignation was entirely coincidental.
With corporate governance issues coming under the scanner— and with that the role of independent directors being debated—the independents are understandably cagey about continuing in owner-driven companies. “After the Satyam scandal, no one wants to take a risk as there may be some hidden skeletons. Besides, you must understand that independent directors could be unaware of some promoterdriven initiatives as they attend only a few meetings in a year,” points out P.R. Agarwala, Chairman, Rupa & Company, a Kolkata-based hosiery manufacturer, who recently quit as an independent director from the board of Khaitan Electricals within a month of joining. He’s coy about his own reasons for resigning.
Seventy-five-yearold T.K.K. Bhagwat, erstwhile independent director on the board of Pune-based realty outfit D.S. Kulkarni Developers, typifies the apprehension that has gripped his tribe that has enjoyed the financial perks and benefits of being associated with India Inc. Clearly uncomfortable about speaking to the media, Bhagwat hedged his reason for quitting and even his tenure. “I was there for 4-5 years and left for personal reasons. As independent directors, we join when we feel like and leave when we feel like,” he says. The company’s CMD, D.S. Kulkarni, was unavailable for comment despite repeated attempts to contact him.
Most independent directors BT spoke to claimed that they were on the board as the promoters were friends. While Piramal introduced Kothari as an old friend and associate of the Piramal family, Agarwala of Rupa alluded to his friendship with the Khaitans. Which certainly begs the question: is friendship the main criteria for getting a plum seat on a company board?
Real estate companies, of course, feature prominently in the list of “quitters”. Bangalore-based Sobha Developers has seen the resignation of an independent director, N.S. Raghavan, Founder and Joint MD, Infosys, and Founder of Nadathur Holdings and Investments. “Raghavan is getting out of all his businesses and needed time for that,” points out J.C. Sharma, MD, Sobha Developers. Sharma adds that there never has been an incident during a board meeting when the independent directors voiced opposition to any management initiative or decision. Raghavan, for his part, could not be contacted with his office informing that he was out of the country.
Of course, while there have been some high-fliers who have quit as independent directors recently— these include P.R.S. Oberoi, Chairman, EIH, who resigned from the board of Jet Airways—there are a number of penny-stock companies who have been afflicted by the trend. But what unites all of them is their reluctance to discuss their reasons for quitting. As is now well-documented, the penalty for breaking the omertà was a swift execution.
“It would be wrong to associate Kothari’s resignation with the Satyam scam. He had already indicated his intention to leave the board in October 2008 due to his own professional commitments,” contests Rajeev Piramal, Vice Chairman, Peninsula Land. Perhaps, as Piramal asserts, the timing of Kothari’s resignation was entirely coincidental.
With corporate governance issues coming under the scanner— and with that the role of independent directors being debated—the independents are understandably cagey about continuing in owner-driven companies. “After the Satyam scandal, no one wants to take a risk as there may be some hidden skeletons. Besides, you must understand that independent directors could be unaware of some promoterdriven initiatives as they attend only a few meetings in a year,” points out P.R. Agarwala, Chairman, Rupa & Company, a Kolkata-based hosiery manufacturer, who recently quit as an independent director from the board of Khaitan Electricals within a month of joining. He’s coy about his own reasons for resigning.
Those who bailed out Some notable quitters. |
Seventy-five-yearold T.K.K. Bhagwat, erstwhile independent director on the board of Pune-based realty outfit D.S. Kulkarni Developers, typifies the apprehension that has gripped his tribe that has enjoyed the financial perks and benefits of being associated with India Inc. Clearly uncomfortable about speaking to the media, Bhagwat hedged his reason for quitting and even his tenure. “I was there for 4-5 years and left for personal reasons. As independent directors, we join when we feel like and leave when we feel like,” he says. The company’s CMD, D.S. Kulkarni, was unavailable for comment despite repeated attempts to contact him.
Most independent directors BT spoke to claimed that they were on the board as the promoters were friends. While Piramal introduced Kothari as an old friend and associate of the Piramal family, Agarwala of Rupa alluded to his friendship with the Khaitans. Which certainly begs the question: is friendship the main criteria for getting a plum seat on a company board?
Real estate companies, of course, feature prominently in the list of “quitters”. Bangalore-based Sobha Developers has seen the resignation of an independent director, N.S. Raghavan, Founder and Joint MD, Infosys, and Founder of Nadathur Holdings and Investments. “Raghavan is getting out of all his businesses and needed time for that,” points out J.C. Sharma, MD, Sobha Developers. Sharma adds that there never has been an incident during a board meeting when the independent directors voiced opposition to any management initiative or decision. Raghavan, for his part, could not be contacted with his office informing that he was out of the country.
Of course, while there have been some high-fliers who have quit as independent directors recently— these include P.R.S. Oberoi, Chairman, EIH, who resigned from the board of Jet Airways—there are a number of penny-stock companies who have been afflicted by the trend. But what unites all of them is their reluctance to discuss their reasons for quitting. As is now well-documented, the penalty for breaking the omertà was a swift execution.
