KEEPING POLITICS OUT OF BOARDROOMS
The ongoing boardroom drama at Indigo is scary. Time and again, we come across this infighting as the company starts growing bigger and it makes one wonder whether boardroom squabbles should be listed a veritable risk factor while considering any investment because it is an ailment, like cancer which can eat away the company and render it lifeless.
The boardroom fight at Indigo is not a family feud – it is between two co-founders, Rahul Bhatia and Rakesh Gangwal. They also happen to be the largest shareholders, thereby having rights to alter and make way for new strategies and plans. And currently, the fight is over the future growth strategy and ambitions of the airlines. We wonder if Jet Airways had not happened, would this infighting have emerged.
Time and again we have seen how various boardroom squabbles have destroyed the reputation and disrupted the working of the company. Take a look at these few other fights and this point will get into perspective:
The biggest in recent times is undoubtedly Ratan Tata and Cyrus Mistry. It was a messy break-up and almost Rs.21,000 crore were wiped off Tata group staocks in 48 hours since the fight broke out. Ratan Tata was unhappy with Mistry’s way of working and strategies while Mistry accused Tata of interfering in the workings.
Infosys too was a victim, in fact it was so serious, it tarnished the image and impacted the earnings badly. The boardroom fight here showed that founders never really leave the company they say they have left. Narayana Murthy retired but his questioning over Vishal Sikka’s pay package and corporate governance lapses shook the very foundation of the company. And this is a company which is the top most of the top when it comes to management.
The ugly fight at e-commerce giant Flipkart left everyone with a wry face. The quitting of Samjay Bansal first and then Binny Bansal, the entry of Walmart and Kalyan Krishnamurthy was truly a sad story of the founders left with nothing when a MNC giant plays politics.
The fight between L&T and Mindtree too is making waves. It is also a throwback to the fight between L&T and Reliance when Dhirubhai made a bid to take over the company.
The battle at Yes Bank, between co-founder Ashok Kapur’s family and Rana Kapoor wet on for years. And looking at where the Bank is today, we cannot help but wonder if its karma which finally caught up.
Vijay Mallya had a long fight with the Board of United Spirts, with the latter asking Mallya to step down in April 2015 after a probe report revealed alleged financial irregularities on part of Mallya, including diverting funds to Kingfisher Airlines. After a long battle, Vijay Mallya stepped down as non-executive chairman of USL in February 2016, but not before Diageo agreed to drop the charges of irregularities against him, and pay him 75 million USD for five years.
Ajit Kerkar of Indian Hotels was ousted by Ratan Tata. Kerkar was accused of lacking in fiduciary responsibility, good governance and transparency, accused of diverting funds to Cox & Kings, which were under direct charge of his family. This was a very intense boardroom fight.
The fight between Sunil Alagh, CEO and managing director of Britannia Industries and Nusli Wadia was messy to say the least.
One can go further back into history and find many such boardroom dramas. But the moot point here is that it is virtually impossible to detect a probable squabble before it breaks out.
But what the Boards can do is to ensure that boardroom fights do not tarnish the image of the companies or lower the earnings in the long term. In a multifaceted organization, conflicts are bound to arise. What matters is the capacity to deal with such conflicts – that is what will make or break the image of the company.
For Indigo, this is probably a golden time and the Board needs to resolve the conflict quickly and amicably. The readiness of the leaders and the manner in which the conflict is dealt with will decide its future path. The job of the CEO is not merely that of being a visionary; he/she needs to ensure that faith of all stakeholders is kept intact.