‘Succession planning is a key challenge in India’ Contrary to companies’ claims, we have seen cases like Infosys where the systems do not throw up the kind of leaders they require, PANKAJ DUTT tells RitwikSharma

Could you give us a background of the company and presence in India? We are an executive search firm founded in 1957. We stay focused on executive search and advising boards, which was our core service when we started. We entered India in 2012. In 2011 the management decided that even if we have to start with a nimble presence, we will have our directors in key markets. We see a lot of prospects in terms of the deficits and leadership demands in Southeast Asia. Because pretty much like India firms in the region never had the talent pool of mid or senior professionals. Our first office in Southeast Asia, besides India, was opened up in Kuala Lumpur, and from there we are serving markets like Indonesia, Vietnam, Cambodia, Malaysia and the Philippines.

In India our practice is growing yearon-year at a CAGR of around 30-35 per cent. Our focus has been to build relationships with primarily Indian-owned companies and groups, because we can help them quite a lot in the global markets. The secondary objective is to provide service to our local clients who have India offices. But our efforts are largely driven by building new clients relations. There is a lot of talent deficit at the top level of companies, a lot of opportunities/issues in terms of succession planning. Contrary to companies’ claims of having a very healthy leadership pipeline, we have seen in cases like Infosys that the systems do not throw up the kind of leaders they require. We are also helping a few very exciting, emerging start-ups. Because of our focus Managing partner, India & Southeast Asia, Alexander Hughes on hiring consultants who themselves have been CEOs, our closure rate in comparison to our competition has been pretty high. What are your observations on corporate governance across industry in India? What we have observed in Europe is that boards very early moved on from being legally compliant to being transparent and well managed. In India since the time after liberalisation when Sebi was formed the way boards have shaped up has been more reactive to regulatory changes. So you will seldom see a board creating accountability or bringing transparency to how it takes decisions. Even its communication with shareholders has been very restrictive. This is in total contrast to how you will find boards function. Whether it’s a large company or small, board members independently and frequently speak about what they think of the company strategy, their intent of changing the CEO or issues such as mergers or acquisitions or selloffs. In India, the selection of board members has been a tremendously safeguarded issue in 90-95 per cent of the cases, which actually results in this camaraderie or coterie of collusion. You will also see cross-directorships in companies. The regulator cannot enumerate everything that you need to do. Being legally compliant is a just a crucial subset of corporate governance. The governance gets tested on two-three counts. One is how transparent you are; so anyone, even holding one share, can go and scrutinise a decision. Second is being proactive and owning up to issues which have direct impact on shareholders. How far can regulators help then? I would say a regulator cannot keep plugging loopholes. The focus has to shift from boards being just independent to being effective. Not every independent board can be effective but every effective board would be independent. That demarcation hasn’t sunk in yet, because primarily board governance matters are still driven by majority shareholders.

In India, you will also notice promoters who tend to be shareholders become part of the management. That blurs the line in setting accountability between the management and board. So an independent director representing 10-20 per cent of the shareholders will never feel the inclination to act against somebody who is a majority shareholder. In abroad, families are never part of the board of family-owned businesses. In India, the shareholder and management has not been segregated very effectively. Perhaps in governance, India Inc. has seen governance 1.0 for the last 15 years, and world is going 3.0. In what ways can you intervene? There are a few situations where we are called in. One, when we are asked to audit the composition of the board, as to whether the skills and size on the board are commensurate with the complexities a company faces. A lot of forward-looking companies see that as a practical and professional exercise, where instead of deliberating internally they call in a professional firm like us. When a German automaker was struggling to get into the US market — because automotive can also be a regulated market — we were asked to suggest how the board should deal with it. And we recommended somebody who understood public policy and foreign relations to help them understand how to navigate the policy environment in an unfamiliar country. So, we ended up putting an exdiplomat in the board of the company.