Corporate India needs a new crop of directors

The National Stock Exchange (NSE), India’s premier, tech-driven exchange that was the first to implement electronic trading in the country says this about itself on its website: “Powered by millions of dreams, hopes and aspirations, India today is brimming with potential. At NSE, we are driven by this ambition that makes India charge ahead … Our ambition gives us direction. It pivots, and propels us. It is the leap we take from today, towards a brighter tomorrow.”

It is the MD and CEO of this company from 2013-2016, Chitra Ramkrishna, who was arrested in New Delhi over the weekend, quite an expected event that will unlikely throw new light on her shameful, brazen and grossly unscrupulous behaviour that eventually brought the CEO down and sullied the reputation of what was thought to be India’s showpiece clearing house. It merits retelling that Ramkrishna played around carelessly with this premier stock market on the advice of one so-called yogi she said she never met. She hired a Chief Strategic Officer and further promoted him to Group Operating Officer flouting all norms and regulations of the company she led. This person, Anand Subramanian, admittedly not qualified for the role, saw his salary grow from 1.68 crore per annum in 2013 to 3.67 crore in 2015 on repeated increments that had no relation to his work, the company guidelines or policies on remuneration. A SEBI order highlighting the irregularities and criminalities has called her actions “bizarre misconduct”. It pointed out that the company board knew of the irregularities and did not act, delayed in sending a reply to regulatory queries and allowed Ramkrishna to resign and even recorded appreciation for her work!

Corporate governance has failed India and Indian investors, not something that is likely be appreciated by the mandarins of corporate India

NSE under Ramkrishna stands out as a case study in itself, given the extent of the muck that sits in there. Yes, this is a particularly wild variation of the mis-governance virus but the trouble with Indian corporate governance is that flouting of norms, violation of well laid down practices and procedures and even outright scandal is not uncommon in the governance set up of India even today. Further, in a country where hierarchy is still important, where dissent is often not tolerated or even encouraged and the culture of seeing the person up the ladder as the boss who is always right is ingrained, the set up makes it more difficult to enforce modern governance standards. It is true that norms have got stiffer, that directors can go to jail, that standards as they are written down are perhaps among the best in the world but also the way the frameworks play out in practice is very different form the way they are intended to.

NSE under Ramkrishna stands out as a case study in itself, given the extent of the muck that sits in there

If the case of NSE leads to a long 190-page SEBI order in Feb. 2022 for violations that happened more than six years ago and enabled the CEO retire with cozy friendships and packages, if the CEO is arrested a further month after that, then the message to the looters of public wealth sitting on company boards is that anything goes. Weak and slow regulation, the lack of visible and exemplary punishments, unlike as is seen in the US, makes it more difficult to have good governance.

It needs to be stated boldly that corporate governance has failed India and Indian investors, not something that is likely be appreciated by the mandarins of corporate India. A key part of the trouble lies in the current crop of directors and the way they are selected and placed in their roles, the relationships that are at work here and the consequent approaches in which they find a way not to do their duty or to perform with the lightest touch. Sure, there are honorable exceptions. Many have quit and limited their directorships. But still, they are all birds of a feather that flock together and more often than not are playing the role of regulators of a company sitting in comfortable surroundings, among friendly people, asking polite questions and pussyfooting about what really is a burning topic of India today.

Weak and slow regulation, the lack of visible and exemplary punishments, unlike as is seen in the US, makes it more difficult to have good governance

Most of them have claims to expert knowledge, which really is the workings of a corporate set up that many have spent their lives in, have since retired and found their sinecures in some similar role – a private version of some ‘Yes Minister’ brigade that knows how to protect its own interests, where to look and where not to look if the position is to be preserved and maintained. But as we may be learning in many other fields of knowledge, it is best not to leave the important matter only to the experts. It is time to open the pool to a variety of players.

Nawshir Mirza, a leading voice on corporate governance who is probably the only one who says it like it is, writes in one of his columns: “the one common and overriding criterion for the selection of a director by the person in control of a board is the absence of a spine.” Mirza has for over 20 years sat on the boards of more than half-a-dozen companies and observed the behaviour of many other directors during the preceding 36 years as an auditor. He notes that “… many directors who are loudest in professions of good governance, are the meekest when seated around the board table. Several of these directors burnish their reputations by holding forth at seminars on corporate governance; for the insider it is shocking to see the chasm between the conduct they preach from the lectern and that which they practice at the board.”

If credibility is to come to corporate governance, the pool of directors must be widened to include people from a variety of fields – we need union leaders, social leaders, researchers, scientists, and a host of others to bring fresh air, new thinking and a powerful voice to board rooms. We need more questions, more noise and more listening to people from down up in our companies if governance has to improve. This will not be an easy task but an easy way to begin is to resist the temptation to hire all those familiar folks who are used to being around our homes, clubs, boards and companies.

(The writer is a journalist and faculty member at SPJIMR. Views are personal)