By Ruma Dubey
Yogi Deveshwar and ITC seem to be synonyms for each other – who derives meaning to their name more – Deveshwar from ITC or ITC from Deveshwar; that’s an over two decade old question. It seemed there could be no life for each other without each other! Looks like the same story continues even today though a new CEO was appointed and Deveshwar is the non-executive chairman.
During the AGM in May’16, the much awaited question was answered – who will succeed Deveshwar? An inside man and ITC veteran, groomed personally by Deveshwar, Sanjiv Puri was appointed at CMD and Deveshwar announced that he would step down in July 2017 and continue as a non-executive chairperson for a period of three year. Deveshwar’s tenure ends on 4th Feb’20.
Yet, yesterday, the company announced that it will be holding its 107th AGM on 27th July and one of the important things on the agenda would be approval of the re-appointment of Mr. Deveshwar as Non-Executive Director, not liable to retire by rotation, and Chairman of the Company for the period from 5th February, 2020 to 3rd February, 2022.
Along with this, the AGM also seeks to re-appoint Sanjiv Puri as Managing Director for a period of five years with effect from 22nd July, 2019.
Devehswar’s current tenure ends in 2020 and that of Puri in 2019. So why this need to extend at the 2018 AGM? There are two more years for Deveshwar’s tenure to end; why this hurry?
More importantly, why was Puri demoted from CMD to MD? No reason is cited for this. And why is Devehswar’s non-executive term extended further? The AGM Notice gives a very vague reason for this - the Nomination and Compensation Committee and the board of directors were of the view that this extension was in the best interests of the company, in view of the increasing size and complexity of the organization.
But all along, the company which Deveshwar nurtured for over two decades to what it is today, a big FMCG and cigarette company, always faced complexities. The vagaries of running a cigarette making company, at a time when every Govt wants to promote the image of taking a stand against smoking, with increasing duties and now GST, was always a challenge. It is the cigarette business which has funded its FMCG, hotel and agriculture and all ventures. The FMCG business is doing well and holds good promise for the future. Yet, the stock price has always underperformed the stock market even when other FMCG companies like HUL did well. Thus challenges were always there, which is why, we all assumed that Deveshwar groomed Puri to the helm.
This re-appointment of Deveshwar undermines the trust which the Board has on Puri. The message which comes across is that despite Puri being the Chairman, it needs Deveshwar to lead. Actually two messages – one that they have little faith in Puri and second that they cannot simply let go of Deveshwar as they fear the unknown and feel that only he can steer the company, always. It does happen that the choice could go wrong; so if that was the case, why not appoint someone else who Deveshwar thinks is more capable? Or is there simply no one else? Deveshwar's shoes are too big to fill; so that can never be the measurement; a new pair of shoes will necessarily have a new measurement.
ITC is one of the most professionally run companies in India, even before we in India knew the true meaning of what “professionally run” meant. One cannot help but think about almost the same thing happening in Infosys or Tata group. What does it convey - that only the person who steered the company for so long is capable enough? Is the trust factor missing in the professional companies?
Indeed, these are challenging times, and a strong person is needed at the helm. But isn’t this what Puri was mentored for? This lack of faith and the need to cling onto Deveshwar sends a very wrong message, especially for a professional company like ITC.
No doubt, it is Deveshwar who made ITC what it is today but at one point, the old has to make way for the new or else they should have simply let Deveshwar continue as Chairman endlessly. Non-executive on paper but executive in reality – this irks and could be injurious to ITC’s professional health.