Curtains for cozy cabal that operated company since 1987
MUMBAI/NEW DELHI: With the government seizing control of IL&FS, it is curtains for the cozy cabal that ran the firm since it was founded in 1987.
A tribunal’s decision to allow the government to oust IL&FS’s current board and replace it with a 6-member independent board raises serious questions about the top officials of the company as well as independent directors whose job it was to ensure the company adhered to the best corporate governance practices.
The lens is now firmly on IL&FS’s vice-chairman and managing director Hari Sankaran, who has been with the company for 28 years, and the company’s erstwhile chairman Ravi Parthasarathy, who stepped down in July citing health reasons and has also been with the company since 1987—first as its chief executive officer, then MD, then vicechairman and MD and then finally as chairman and MD in 2004. The trio also included Arun K Saha, joint MD and CEO, who joined IL&FS in 1988.
That these three executives have some answering to do is evident from the statement issued by the government on Monday: “The decision to supersede the existing board was taken after careful consideration of a report received from the regional director, Mumbai under the ministry of corporate affairs which clearly brought out serious corporate related deficiencies in the IL&FS holding company and its subsidiaries.”
But the story doesn’t end with them. Many of the independent directors have been with IL&FS for decades. Sample this.
RC Bhargava, chairman of Maruti Suzuki India, has been on the board since August 1990; Michael Pinto, a former bureaucrat, joined the board in July 2004; Sunil B Mathur, a former chairman of LIC, joined the board in January 2005; and Jaithirth Rao, formerly country head at Citicorp, was appointed as director in August 2012. “Over the years, IL&FS has done some good projects because there was no dearth of capital... the board should have assessed the evidence of productive capital. The board should have been cognizant of the fact that capital should have been properly used. It should have judged whether manager’s role and performance was up the mark. Did they ever ask why their compensation was so high?” said Shriram Subramanian, MD of proxy advisory firm InGovern.