Promoters vs Professionals- Who wins?

The once much acclaimed for its corporate governance Infosys is in the news for all the wrong reasons. Its CEO decided that the interference from the promoter owner was too much to handle and preferred to call it a day. His shock resignation brought the share price down significantly. This incident raises several pertinent questions of corporate governance, code of conduct and the roles of promoters and professionals in sharp focus. 

At some time in the past, this company was the toast of all watchers. The owner’s selfless contribution, his simple ways of living etc. were the topic of many boardroom discussions. If at all there was any company that was to be the benchmark for principles it was this company. But what now transpires from the various communications that are emanating from various sources point out the following:

• The promoter(s) have created an untenable atmosphere. No freedom, trust or empowerment.
• Too much public noise by Promoter(s)
• accusation of financial impropriety and debatable acquisitions

While the above complaints are from the professional manager the owner(s) have this to comment:

• The CEO is really not a CEO material but at best a CTO.
• The board has chosen to overlook the complaint of the whistle-blower.

And so, it goes on. The question now begs to be answered is if this is not a very familiar scenario happening in every family-managed company in India. Time and again between the issues between the professional managers and the owners always the owners have prevailed. Really a sad reflection on the corporate governance of such a highly acclaimed company. The role of the board also comes in sharp criticism. They were supposed to shield the COO. But looks like they, while siding with the CEO did not sufficiently create a protective shield around him.

What happens in a company also happens in the government. The case of Raghuram Rajan is well known. After all, he was an outsider and a professional. The government belongs to the civil service officers who are immortal owners of the establishment. So how could he have survived?

Finally, the question needs to be answered as to how we judge the real quality of a world-class company. In the end, it does look like even the promoters of the world-class company have feet of clay. Satyam now known for the biggest corporate frauds in the world was adjudged as the best company in corporate governance and its owner was given the Golden Peacock Award by the World Council for Corporate Governance (WCFCG) in 2008! Time for Infosys to get this award!