Corporate Governance Demystified
Excellence Enablers Private Limited
April | 2017
A series of interfaces with the entire range of stakeholders of Corporate Governance, has given rise to a number of questions, issues, concerns and, happily, some suggestions and solutions. In each issue of this monthly newsletter, we will be getting two experts to articulate their thoughts on a specific topic. The thirteenth issue is now with you. Needless to add, we welcome your feedback.
CHAIRPERSON – SUPERBOSS OR FIRST AMONG EQUALS?
“I am monarch of all I survey;My right there is none to dispute.”
“Give every man thine ear, but few thy voice.”
William Cowper The Solitude of Alexander Selkirk
Polonius to his son Laertes
Chairperson, Excellence Enablers
Former Chairman, SEBI, UTI and IDBI
R. S. Sharma
Former Chairman and Managing Director,
Oil and Natural Gas Corporation (ONGC)
The lead actor in the theatre of corporate activity is the Chairperson of the Board. She has to provide the enabling environment in which each Director contributes to informed discussions, debate and decision-making. In Boards, as in any other collection of individuals, there are persons who have something to say, as also persons who believe they have to say something. Keeping the interventions relevant, and the discussions on track is a skillset that Chairpersons must necessarily have. To sit back, and watch with indifference or unconcern, the performance of Boardroom bullies is not a luxury that is available. At the same time, interrupting every speaker midsentence and imposing one’s views because of the leadership role, is counterproductive in the context of collective decision-making.
The challenge is higher for Executive Chairpersons who have risen from the ranks. The tendency to see oneself as the sole repository of wisdom and knowledge almost always translates to seeing the others in the Boardroom as only making up the numbers without having anything to contribute. As against this, there are Chairpersons who, having welcomed Board colleagues to the meeting (thank God, they do at least that!), lapse into studied silence, leaving it to the Company Secretary or the Managing Director to conduct the proceedings.
Reality is often no respecter of enacted law, which does not envisage a Superboss. Overimposing, centre-of-the-world leadership styles have contributed to negating the Primus inter pares (first among equals) role of Chairpersons in Boardrooms.
Between the practitioner of benign neglect of her role, and the not-so benevolent dictator who believes that she is the company and “the rest is mere detail”, is the genuine Boardroom leader who seeks to involve everyone in a constructive conversation focused on the company’s goals. Encouraging the expression of diverse, often conflicting views, focusing on issues and not individuals, and practicing harmonious construction leading to decision-making, a good Chairperson commands the respect of her team. Maturity, wisdom and character are the building blocks on which this approach is premised.
Steering the ship, sometimes through stormy seas, to safe shores sets a good Chairperson apart from the crowd. By common consent, even without the prop of legal provisions, such a person is first among equals. Superboss – definitely not. Superperson? Possibly!
The term Chairman or Chairperson is not defined in the Companies Act, 2013 (The Act). Unless specifically provided for in the Articles of Association, one of the Directors is elected by the members of the Board to function as Chairperson. The Act also does not prescribe any qualifications for the Chairperson.
Various sections of the Act deal with the functioning of the Chairperson. Substantively, the Chairperson has the prime responsibility for conduct of Board meetings, which warrants that she must possess certain abilities and qualities expected of a leader, to be impartial, well informed of the law(s), practice, proceedings, procedures and rules. In doing this, she is supported by the Company Secretary for ensuring strict compliance of the relevant provisions of the Act.
The Chairperson has the responsibility to ensure that the views of all Directors are heard during deliberations, and the Board Meetings achieve the purposes for which they are convened. She has a lead role in reviewing the composition, efficiency, and performance of the Board. The Chairperson is also primarily responsible for all governance practices in the functioning of Board. While she has all responsibilities for effective functioning, she does not hold any veto or special powers to steer a decision in majority views. The only special power vested with the Chairperson is a casting vote if so provided in case of a tie.
I was privileged to be on the Board of the largest corporate entity of this country for 9 years during 2002-2011, and for more than half of that period as Chairman & Managing Director. When I superannuated in January, 2011, ONGC had the distinctions of having the largest market Cap, highest profits, highest dividend, and highest tax paying corporate entity.
With my own experience, I may share that the position of Chairperson warrants top quality of justice, fairness, equity, exemplary personal conduct and leadership to be effective. These leadership qualities call for ability to carry the Board members, allow equal opportunities for everyone to freely express, maintain time sanctity and ensure the resolutions are passed ideally with unanimity, but necessarily with majority views.
It is therefore clear that the Chairperson is not a Super Boss but only First Among Equals.
Do let us know of any specific issues you would like to see addressed in subsequent issues.
Corporate Governance Specialists | Adding value, not ticking boxes | www.excellenceenablers.com