OPINION | Vault Matters: There are times when dissent and discord in India Inc are good 

The HDFC saga must end soon

Last year, India’s cricketing authority BCCI conducted a probe to find out who leaked sensitive dressing room information to the media after a full-blown war between Gautam Gambhir and Rohit Sharma.

The same year saw tension building up at the board of Tata Sons, a battle which is being played out through the media. Meanwhile on March 19 morning, most bankers woke up to a boardroom drama that happened in HDFC Bank.

There are many similarities between the three instances.

Common thread running through some high-profile blowups

Firstly, years of dissent and tension built up between two individuals came to fore possibly in an unexpected manner.

The second important aspect, and why the HDFC saga must end soon, is because all the three aforementioned institutions are among India’s most recognisable names and crown jewels in their respective fields.

The third interesting trait common to all is that the person perceived to be ‘somebody’s Man Friday’, ended up showing that he is the kingpin. Be it Rohit Sharma in case of Indian cricket team or Noel Tata for Tata Sons, the real player emerged in style. So it was with Atanu Chakraborty. The fact that all wasn’t well between Chakraborty, the bank’s former part-time chairman, and Sashidhar Jagdishan, the bank’s MD & CEO, was known to many. The show went on for as long as it could. Today while Chakraborty is gone, he has left behind several unanswered questions. Clouds of doubt on reappointment of Jadgishan which weren’t visible until now have suddenly become thick. Will he get a full three-year term is a question that has kindled investors’ curiosity.

On March 19, Moneycontrol wrote on what nudged Chakraborty to make a sudden departure. Judging his action now is inconsequential; the damage is done with HDFC Bank down over eight percent since the news broke.

Behind the power play lies the question of supremacy

But his action once again cracked open a critical power dynamic in the corporate world – the question of who controls a company, the management or the board.

If tech major Infosys is a benchmark of corporate governance in India, we also witnessed a phase when the board overshadowed a professional CEO who was ousted on the grounds of bad governance.

In the start-up world, Flipkart is the best example of how an investor-led board forced the exit of the company’s famous founders – Sachin and Binny Bansal. The ongoing power struggle at Tata Sons between N. Chandrasekharan and Noel Tata is also an example of board wanting to overshadow the management.

Where management calls the shots

That said, L&T, ITC and Bharti Airtel are a few examples of how the management is equally strong or may be stronger than the board. At a global level, Tesla validates this point in the best possible manner. That said, whenever such power struggles surface, it amplifies the lack of board level consensus – typically between management representatives on the board and the other directors.

It is now well-defined that anything to do with operations, strategy and execution is the responsibility of the management. The CEO and his team nominated on the board are accountable for this. Board’s role is to ensure that corporate governance standards are adhered to.

Role of a foreman

That said, the unfortunate thing about governance is that if there is a lapse on operations, strategy and execution, it does end up being viewed as lapses in governance. Therefore, while the board is not expected to operate on a broad canvas, the canvas ends up becoming big by default, given this vague, unmeasurable and intangible term called governance and that’s where building consensus at the board is critical.

The classic courtroom movie ‘12 Angry Men’ is the best example to offer on how a consensus is built. Typically, it is the job of the foreman to build consensus; chairman in case of a company. In the real world, when a member of the board expresses dissent on a point, the apprehensions get captured in the minutes of the meeting but when it comes to a vote, the dissent is converted into a yes.

Martin Balsam, who played Juror #1 in 12 Angry Men did that; he converted 11 dissenting votes into ayes.

The foreman who walked

Chakraborty was supposed to play that role in HDFC Bank but instead the foreman walked. No amount of effort to project a united front in support of the CEO has helped convince investors that all is well, just yet. If anything, internal scrutiny and taking action against errant employees has just started to happen at the bank. Will Chakraborty end up being the protagonist of this soap opera?