Are CEO-Promoter clashes the next big PR crisis for corporate India
30th August 2017
Earlier this week, the beleaguered car hailing firm, Uber, finally found fresh leadership in former Expedia CEO, replacing founder Travis Kalanick. Closer home, after a bruising public fight between former Infosys CEO, Vishal Sikka and co-founder N.R. Narayana Murthy, the board that opposed the latter is gone and Infosys co-founder, Nandan Nilekani has returned as non-executive chairman.
Both developments highlight issues of company culture and corporate governance. And in India, where family owned business still dominate corporate India and often dictate cultural attitudes, corporate governance could well be the next big PR crisis.
Rediff reported in 2016 that 15 of India’s top 20 firms were family owned.
Subhash Pais, founder and business head, i9 Communications, “India is full of family owned, built over decades, using a certain street smart approach, type companies. As India Inc. rapidly tries to corporatise these challenges will always come to the fore. What we are seeing at Infosys and Tata are just samples of a larger malaise. This is not going to change instantly, or even in time.”
Senior corporate communications professional Moushumi Dutt, who till recently led communications at Phillips India agrees that promoter-CEO clashes could become a source of reputational crises, saying, “ There is an immediate need for institutionalising a standard practice so that as far as possible a corporate crisis can be averted. “
This may be easier said than done. A 2014 PwC report said, “ While two-thirds of Indian family businesses have a succession plan in place, only 15% have one that is robust and documented.” A fact that makes effective communication management a bigger challenge.
Ironically, both Tata and Infosys have iconic leaders in Ratan Tata and Narayana Murthy, leaders who stand for a high degree of corporate governance and values and should be able to transfer that reputational benefit.
However, a senior media and PR professional, who wishes to remain anonymous said, “ No doubt these companies are making a big name for themselves in setting high standards of corporate governance and have a strong investor and innovator tag, but there is also a sense of insecurity that surrounds them when they seek to hand over the reins of an outsiders as it happened in the case of Infosys.”
The anonymous PR strategist added that, “In fact, there is also a case of a leading english language national daily where the promoters experimented with an outsider as the Editor of the newspaper but could not resist the limelight for long and made a unsavoury comeback which led to a lot of bad blood and somewhat bitter parting of ways between the outsider editor and the promoters.
Media watchers will recall this incident as happening with ‘The Hindu,' owned by Kasturi and Sons Ltd. and the acrimony that led to open criticism over the newspaper’s redesign and an editorial decision to feature a picture of a politician being slapped on the front page.
Says our source, “Recent developments do suggest that promoters/founders do get into a zone where they feel that they are being left out of decision making or major issues being discussed within the company. This certainly seems to be an Indian problem. International experience in this regard narrates a different story. The case of IBM, Ford Motors, Intel and scores of others come to mind instantly where outside leadership has taken the company to new heights.The Indian sentiment about family owned business is best run by the family continues to have an upper hand in case of corporate India ownership.”
Access to information
One of the central triggers in the Infosys battle was the sharing of the investigation report of the Panaya acquisition spearheads by Vishal Sikka. This goes to the heart of the corporate legal system which needs to define information access in terms of quantum of shares held .
Say our anonymous commentator, “The whole issue of what and how much access to information should a promoter or a founder have needs to be defined in the law clearly either by the Corporate Affairs Ministry or the regulator SEBI. It is very difficult to say how much and what information can be accessed by the promoters. But certainly the company should have a robust transparent and efficient system in place where information is shared with the shareholders and the Board on regular basis without any Chinese wall in place. “
The source adds, “ A lot of questions have been raised about the $200 million Panaya acquisition by Vishal Sikka where Narayan Murthy has clearly accused the former CEO of hiding information on the acquisition. In fact, an internal investigation was also conducted into the issue by the company but the findings of the investigations were not shared with the board or shareholders putting a question mark over the issue of corporate governance and transparency at Infosys. This was one of the contentious issues that Narayan Murthy had with Mr. Sikka.”
Personal brand suffers
PR experts believe that regardless of who was right or wrong in the Infosys issue, the personal brand of Narayana Murthy (NRN) has certainly taken a beating. Says Pais, “Am still trying to second guess where NRN is going with this. It looks like a quest for power more than anything and that disturbs me. NRN was the man who said that perception was as important as reality, this drama will do his own personal brand a lot of harm. The shareholders who are currently being assuaged with the mega buyback offer will also not be impressed by the timing of this episode. The manner in which this entire week has played out for Infosys , Sikka and NRN I would say it shows a rot that seems to have set in which will be difficult to clean up. Infosys's competitors must be delighted.”
Dutt agrees saying,” In my view ,the fault lines are embedded in the egos of the leadership team. Corporate culture in both these giants (Tata and Infosys) are very strong and majority of the employees abide by their respective work place cultures. Both these corporate battles were all about skirmishes at the absolute top. “
Away from the technical details of the corporate battles, Dutt points out that, “To the larger public, it was perhaps a failure of maintaining decorum at a peer level, and when you have a public persona which Mr Murthy definitely had, you need to be extra cautious with regard to the messages you give out to external stakeholders.”
As Indian companies enter a phase of rapid consolidation, all under the watchful eye of social media, there is need to understand the sentiments underpinning the clashes between promoters and non promoter CEOs.
Says Pais, “One hopes this painful phase of transition, once over, will lead to companies like Tata and Infosys enunciating and understanding why there is absolutely no sense in shooting oneself in the foot. Change is very often painful and most people adopt a very guarded and combative approach towards it. The experiences of Tata and Infosys is not likely to give a shot in the arm to India Inc. as old guards look towards succession planning and building a future for their companies. We need better attitudes, perhaps a better understanding of the psyche of the founders vs CEO dynamic.”
As this happens, PR companies and corporate communications professionals will need to be out there in the battlefield, understanding and planning the nuances of this particular war.
Written by Paarul Chand+, PRmoment.in