Associate Partners
Get App


Associate Partners

you are here: HomeNewsBusiness
Last Updated : Oct 10, 2018 12:13 PM IST | Source:

Independent directors must act like Vibhishana, not Kumbhakarna: R Gopalakrishnan on corporate governance

Former Tata Sons veteran R Gopalakrishnan sheds light on how independent directors could be more effective on the backdrop of events at ICICI Bank, Yes Bank and IL&FS

Prince Mathews Thomas @prince0879
  • bselive
  • nselive
Todays L/H

The series of events highlighting corporate governance issues at ICICI Bank, Yes Bank and IL&FS have brought back the focus on independent companies. In early October, the board of IL&FS was superseded, bringing back memories of the Satyam scandal.

The problem, says R Gopalakrishnan, the former Executive Director of Tata Sons, is not about a lacunae in laws. "There is a hard part of corporate governance and soft part of corporate governance. Failure happens when you go only by the hard part, which are the laws," says Gopalakrishnan, who has for over 30 years sat on the boards of leading companies, including those in the Tata Group, and Unilever. He continues to be on the boards of companies, including Akzo Nobel and Castrol India .

The soft part, he says, is about the culture, and recounts the famous incident in Ramayana, when Hanuman is brought before Ravana, and the role played by Vibhishana, who made the Lanka king see reason.

"We don't have many Vibhishanas," says Gopalakrishnan in an interview with Moneycontrol.


Q: The crisis in IL&FS has brought the spotlight back to the role of a board, and specifically of the independent director. It comes nearly 10 years after the Satyam scandal, which also saw directors being barred. Have things changed?

A: We have made great progress. The 2013 Companies Act put down important provisions when it comes to independent directors. At the same time, we realise how much more needs to be done.

While there is scope to improve laws, I have felt increasingly that people don’t live lives by laws alone, but also by culture and habit. For instance, you may put up a board on the roads saying no honking, but in Mumbai everyone honks.

The cultural part of corporate governance should be equally given importance. That is important because even as the role of independent directors has evolved, the size of the problems has also increased.

Q: What do you mean by the cultural part of corporate governance?

A: Take the example of a family. How is the family’s culture determined? It comes from stories from parents, uncles, or from advice and mentoring of grandparents.

Now independent directors need to play the same role.

Look at Ramayana. When Hanuman was brought to the court before Ravana (who wanted Hanuman to be killed), his brother Vibhishana told the Lanka king: “You are the pinnacle of wisdom. It doesn’t behove you to do kill an emissary, who just came with a message. So I pray to you don’t kill, even if you want to punish him.” On the other hand, Kumbhakarna slept through. We have too many Kumbhakarnas, and not many Vibhishanas.

Q: Is that why we continue to have episodes like the one in IL&FS?

A: Yes.  At the same time, independent director is one of the many checks and balances. There is an auditor, CFO, valuation agency, rating agency… it’s like an onion with multiple layers.

Q: So there is a limit to what an independent director can do?

A: There is. But it depends on the independent director how he wants to play his or her role.

Let me tell you an anecdote. A company in which I was an independent director, wanted to do an acquisition. I said this acquisition is not really adding value, and I can’t see how it is doing to benefit shareholders. At the same time, it won’t be a disaster. I told the CEO that the risk is low, and if he is keen, then should do the acquisition.

What is being missed is the wisdom to find a pathway between laws and cultural behavioral patterns.

Q: Often a CEO or a promoter is an iconic person, as we have seen in many of the recent developments. Does that prevent independent directors from making their voice heard?

A: The directors have to first realise that they are not a pujari, and are not meant to put garlands around Gods. Then it’s better not to be on the board. If I don’t have the stature, courage and competence to express my point of view, then why am I there?
First Published on Oct 10, 2018 12:13 pm
More From
Follow us on
Available On
PCI DSS Compliant