The Godrej family has been one of the most-cited business case study of successful close-knit family businesses that has functioned without glitches for over a century. The 122-year-old conglomerate has been unfazed by any controversies surrounding traditional family-run units. Roles had been clearly defined and the third generation had their board positions across companies. Even the joining of the fourth generation seemed seamless.
May be, not all is well.
The family has hired experts to manage a difference of opinion that seems to have come up between Adi Godrej and his brother Nadir Godrej on one side, and their cousin Jamshyd Godrej on the other. The bone of contention is the real estate business, which has a land parcel that is valued at Rs 20,000 crore. Reports suggest that there is a difference in opinion between the two sides, on how the land parcels of the group should be utilised.
Kamal Karanth, co-founder of specialist staffing firm Xpheno, said that unlike the previous conflicts, this case (of Godrej Group) seems to be a more ‘sophisticated’ difference of opinion. In other words, instead of washing dirty linen in the public, the cousins have decided to sit across the table and resolve the issues with the help of advisors. Kotak Mahindra Bank CEO Uday Kotak, JM Financial chairman Nimesh Kampani and Cyril Shroff of Cyril Amarchand Mangaldas are helping the family members to resolve the issues.
However, experts state the complex shareholding structure and cross-holding of the family members among the companies has made the process more complicated. With all the young Godrej sons and daughters managing the businesses, it was crucial to get the issue resolved in the nick of time.
In a joint statement issued later on June 27 , Adi and Jamshyd Godrej have stated that they have been working on a long-term strategy plan for the group for several years. They also admitted that they have sought advice from external partners to think through the options.
The family
Godrej Group was set up in 1897 by lawyer Ardeshir Godrej. He was joined by brother Pirojsha Godrej.
Pirojsha had three sons-Burjor, Sohrab and Naval. Adi and Nadir are sons of Burjor, and Jamshyd is son of Naval.
It was this third generation that took the business to the next level of growth. While Adi Godrej is the chairman of the Godrej Group, his brother Nadir is the managing director of Godrej Industries and chairman of Godrej Agrovet Ltd. Jamshyd looks after Godrej & Boyce Manufacturing, the family's consumer durables holding company.
Adi, an MIT grad, took charge as the Chairman in 2000. His children Tanya Dubash, Nisaba and son Pirojsha hold key positions in group companies.
Pirojsha is executive chairman of the Godrej Group while Dubash is an executive director of Godrej Industries. Nisaba is the executive chairperson of Godrej Consumer Products. Their brother Pirojsha is the managing director and CEO of Godrej Properties, the group’s realty arm.
Similarly, Navroze Godrej, Jamshyd's son, had joined the company in 2005, and looked after innovation at Godrej and Boyce. He resigned in August 2018 and his cousin Nyrika Godrej took over from him.
A former company executive said that a few family members have taken a stand to pursue non-business interests. But he added that the succession plan must be clearly stated to ensure that each member of the future generation is aware of their roles.
However, another company insider added that unlike other business families that portray a hot-cold relationship between the siblings, the Godrej family is still one of the most close-knit business families.
"A difference of opinion does not necessarily mean a conflict. Adi Godrej has a reputation of successfully managing any misunderstanding. It is much smaller than what it has been blown up to," he added.
The cross-holding structure
The shareholding within the Godrej group are also said to have complicated the matter. Even if the businesses are to be restructured, the cross-holdings by the Godrej brothers will have to resolved first.
Adi and Nadir Godrej control the three listed companies— Godrej Consumer Products Ltd (GCPL), Godrej Properties Ltd and Godrej Agrovet.
Jamshyd controls the unlisted Godrej & Boyce. Godrej & Boyce also holds 4.64 percent stake in Godrej Properties and 7.34 percent in GCPL.
Jamshyd and family's trust own 8.66 percent in Godrej Industries. This trust in turn holds 53.65 percent in Godrej Properties and 23.75 percent in GCPL.
Heady? It is.
Way forward
HR experts and company insiders are confident that the Godrej family will be able to iron out the issues.
Rituparna Chakraborty, co-founder and executive vice president, TeamLease Services, said that while family-run units cannot really avoid disagreements, they have to be cognizant of now having visible public conflicts.
The family, on the other hand, has been taking early steps to ensure that business matters are transparent among the family members.
Family members also meet for lunch every Thursday to discuss the business issues among each other. A family council was also set up as early as 2002 where all adults of the Godrej family attend the bi-annual meeting.
Karanth says that unlike a corporate setup, family-run businesses have a closer ownership and each member has an emotional involvement. "Unlike a private entity, family members cannot walk out of a company since they have a large shareholding," said Karanth.
That emotional quotient will be crucial in the coming weeks as the seniors of the Godrej family iron out differences.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
