Raja-praja business model may make disproportionate wealth but trusteeship model builds a nation: Uday Kotak

The founder and promoter of the Kotak Mahindra Bank, Uday Kotak said that his son may head the bank if he has professional merit and depending on what the Board of the bank decides.

There are two business models in corporate India and while one creates disproportionate wealth for the company, the other is what builds a nation, said Uday Kotak, at a conclave organised by India Today.

The founder and promoter of the Kotak Mahindra Bank added that he had always favoured the second.

The billionaire banker was meandering, as he said, from the topic of succession at his bank but he didn’t stray too far because he went on to speak about how companies are run.

Kotak said that he is a “big believer” that there are two business models in corporate India.

“There is one model, which I call the raja-praja model,” he said.

In this model, according to him, “the raja decides what is right for the company and goes ahead and does it, and the Praja has to accept what the raja does”.

He said, “The raja has tremendous power and therefore can create disproportionate wealth for the company but the raja will decide how much praja will get… that is the raja-praja model.”

The second model is what he calls the trusteeship model, “where you (the promoter) say that you are a trustee for all the stakeholders and create a fair business model for all the stakeholders”

Kotak said that the second, the trusteeship model, is not as influential in terms of getting business opportunities as the raja-praja model but “it is far more fair to all stakeholders”.

He said that his instinct has always been to favour the trusteeship model because he believes that this business model is what “truly builds a country, a nation, and a company”.

When asked whether his son Jay Kotak will head the bank, Uday Kotak said that Jay Kotak may do so if he performs well and that the appointment will be based on professional merit and be decided by the board of the bank.

He said, “Today’s times, kids have a mind of their own. He decided to come back and work in the bank like any other professional. It is up to him, if he performs, he may have an opportunity… it is merit, professional merit (that decides). It is for the bank and the board of the bank.”