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THEIR FAILINGS, OUR LEARNINGS

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FORM AND CONTENT

Context:

The forcing out of the Group Chairman of a large diversified group, gave rise to several questions. Issues of process and legitimacy of the decision to remove him led to doubts regarding Corporate Governance practices being followed within the group. Could this have been handled better?

  • In 2005, the Board of the holding company of a diversified Group increased the retirement age of Non-Executive Directors (NEDs) on its Board, from 70 years to 75 years, ensuring that the then Group Chairman would be in office till the year 2012.
  • In 2010, the Company announced a 5-member search committee, to find a successor to the then Group Chairman, who was due for retirement in December, 2012.
  • This was per the terms of Articles of Association which inter alia stated that “For the purpose of selecting a new Chairman and Board of Directors, the selection committee shall be constituted in accordance with the provisions of this Article, to recommend the appointment of a person as the Chairman of the Board of Directors. And the Board shall appoint the person so recommended as the Chairman of the Board”.
  • The search took almost one year, and one of the members of the 5-member committee was chosen and selected as the next Chairman in 2013. He was also made the Chairman of a number of group companies, most of which were listed. His name was reportedly not one of the several names that had been considered from time to time by the committee.
  • The new Chairman had been a Director on the Board of the Company since 2006, a year after his father had retired from it as a Director.
  • There were several media reports which questioned his appointment since he had never handled a large diversified group of companies, which were spread across several countries and geographies.
  • In 2016, he was ousted. The reason given for it was that his style of functioning and leadership resulted in some discomfort or insecurity within the Group.
  • Post his ouster, the Board appointed the earlier person as the interim Chairman, until a successor was appointed.
  • Another committee was formed, and the then-MD of a group company was selected as the Chairman in 2017.