Cut The Cord, Please

Management thinker Vijay Govindarajan says the best wa y to measure the success of a leader is the legacy he leaves behind. Measured by that yardstick, several Indian business leaders are failures. They fail at the first step—spotting a worthy successor and grooming him/her for the corner office. This may not be surprising in promoter-led businesses that even today prefer the ovarian lottery route to decide successors (two in three of the 500 top listed companies in India are family-controlled) and promoters continue to chair company boards until they die.

But it galls me when governance standards on succession are rubbished at companies that are “professionally managed”—a euphemism for board-led and widely-held companies. A prime example is A.M. Naik, the 72-year-old chairman of L&T. There is no doubt that Naik is a very competent technocrat and has expanded L&T’s revenues more than eight times to some Rs 50,000 crore since he became CEO in 1999. (Some analysts take the “boats rise when the tide is high” analogy to describe L&T’s performance. That is taking credit away from where it is due.) Where Naik has singularly failed is protecting L&T’s future by betting on himself to steer the company. When a colleague and I interviewed him for Business Today in 2011, he had just announced an ambitious plan to restructure the company into nine “virtual companies” by rejigging some 150 businesses it had in its fold. In that nearly four-hour-long interview, Naik was equivocal in parts about his term but signalled clearly that he would step down by September 2012. Barely six months to that deadline, L&T’s board decided to increase the retirement age of the chairman to 75 from 70. Naik would have turned 70 later in 2012.

Naik is still there at L&T and, at a recent function to celebrate his 50th year at the company, said he would be busy for the rem­a­inder of his term until 2017 with the firm’s next five-year plan (2016- 21). Heaven help the L&T shareholder. Shares of the company have lost 10 per cent in value since January 2011 when the ‘virtual companies’ plan was announced. The BSE Sensex gained 40 per cent in that period. To be sure, there are other long-serving chairmen scattered around in Corporate India—Y.C. Devesh­war, to name one—but the Naik instance is the most glaring one for me. Contrast L&T with Infosys, another board-run company in India. In recent years, Infosys lost some of its sheen but has come out with renewed promise under a new, non-promoter CEO, Vishal Sikka. When the Sikka announcement was made in June 2014, Infosys said co-foun­der and chairman N.R. Narayana Murthy would become chairman emeritus that Octo­ber onwards. That, to my mind, was disastr­ous. I’d written in Business Today just a month before that Murthy “sho­uld cut all ties with the company, including giving up his chairman emeritus office in the heritage buil­ding on the beautiful Infosys Bangalore campus, once a new CEO checks in. He’s too big a persona for Infosys not to get distracted by”.

I highlighted this in an e-mail to Murthy. He defended the Infosys board decision by saying it was just a title and that he would have no role whatsoever at the company. He must have got the same feedback from others. Come October 9, in a letter to the stock exchanges, Infosys said Murthy “indicated it would not be appropriate for him to be the chairman emeritus of Infosys”. In one stroke, Murthy wal­ked out of the company he co-founded 33 years earlier des­pite the board wanting him to stay—a lesson for India Inc.

Josey Puliyenthuruthel is a New Delhi-based journalist. (Twitter: @joseyjohn); E-mail your columnist: josey [AT] josey [DOT] in