Age Of Professional CEOs, Finally?
Why India needs to produce capable leaders like Deveshwar and Naik
Photo Credit : Bloomberg
Sanjiv Puri does face challenging times ahead at the helm of ITC. But perhaps not as challenging as the times faced by his predecessor Y.C. Deveshwar 21 years ago. Even as analysts in India debate the legacy left behind by Deveshwar and the task ahead for Puri, American analysts are debating something similar about the all American conglomerate GE where chairman and CEO Jeff Immelt is hanging up his boots. The interesting thing is that while it is routine in the US to discuss and debate the performance of professional CEOs, it happens far less frequently in India. This year is unusual for India because another long serving and immensely successful professional CEO A. M. Naik of L&T is also calling it a day.
Both Deveshwar and Naik are symbols of what talented professional managers can offer to India Inc. Both have taken decisive steps that are no less entrepreneurial and risk taking than industrial barons with pedigrees. Both have gambled. Deveshwar by gate crashing into the FMCG sector and Naik by constantly reinventing L&T. Both deserve all the accolades they get; and perhaps the inevitable criticism that comes with the turf. And yet, both remain unsung heroes in many ways.
That is because Indians seem to be fascinated with industrialists with familiar surnames. Talk to an average college student and you will be surprised at how few know what Deveshwar and Naik achieved in their glittering careers. More would probably know about Rahul Yadav, founder of Housing.com! Apart from people following the banking sector, how many have heard of Aditya Puri? The man has been the CEO ever since HDFC Bank was founded in 1993. His tenure as CEO has been far longer and arguably far more successful than the better known banker K.V. Kamath. And yet, Puri is not a name you will hear often enough when you get to talk about people who have launched successful companies and sustained success as well as excellence over decades. HDFC Bank is one of the most valuable banks in the world. But then...
The reality is: in sharp contrast to the US, the corner offices in India Inc, are largely populated by either first generation entrepreneurs or their progeny, no matter their flair, talent or ability to deliver consistent returns to shareholders. Is it any surprise then that the best professional talent from India finds it easier to head iconic American companies than even pedestrian Indian ones?
An Indian Satya Nadella is head of Microsoft. An Indian Indra Nooyi is head of PepsiCo. An Indian Sundar Pichai is head of Google. An Indian Ajay Banga is head of MasterCard. And a whole host of others too are professional managers whose skills and talents could have been utilised by Indian companies. But that simply hasn’t happened because promotors and their families are loathe to hand over charge to business in India.
There are a few reasons for this strange anomaly. First is cultural. India, for all the growth it has displayed over the decades and all the talk of meritocracy, is still a feudal society where dynasties are the norm. You see that in politics, you see that in entertainment and you have seen efforts to inject dynasties even into sports. It is inevitable for sons (not many daughters) to inherit business empires from parents and grandparents. Some have indeed done well. But statistics reveals that most haven’t.
Corporate India is littered with once powerful, successful and profitable business groups that have been consigned to the sidelines by competition. And the inability of inheritors to adapt to changing business environments. Virtually every major business group, barring a handful that dominated India Inc. in the 1970s and 1980s are mere relics. Talented professional CEOs could have salvaged them. But then...
The other reason is that promotors find it very difficult to let go. This results in abrupt departures of professional CEOs even though they were hired by promotor families in the first place. One of the most controversial cases of this relates to Britannia Industries, which is controlled by the Wadia family. By all accounts, Sunil Alagh, personally chosen by the Wadias, seemed to have been doing a great job as CEO of the company. But overnight, amid bitter allegations, Alagh was unceremoniously ousted. Something similar happened more recently at Micromax. Vineet Taneja was hired as the CEO with much fanfare. Micromax was emerging as the nimble price warrior that was giving a tough time to global giants like Samsung in the mobile phone handset market. For a while, it has become No. 2 in the country. But Taneja abruptly quit in early 2016. His exit may not be the reason; but Micromax seems to have floundered in recent times losing market share to competing Chinese brands.
Professional CEOs face trouble even in new age companies that seem to swear by ethics and transparency. Look no further than the Tata Group where the ageing Ratan Tata virtually effected a coup that ousted Cyrus Mistry as chairman of the group. Also, look no further than Infosys where founder promotor N. R. Narayana Murthy seems to keep raising the banner of revolt against professional CEO Vishal Sikka.
The third reason why professional CEOs don’t often get their due in India is pure and simple greed and the legacy of crony capitalism, or socialism if you please. Thanks to absurd and repressive laws as well as greed, Indian promotors want to control day-to-day operations of companies because of finances. This regime does talk about a war against black money, but large swathes of India Inc. have willy nilly been active participants in the black economy. Take the numerous scams that came to light during the second tenure of the UPA regime. It involved alleged bribery and corruption of large magnitudes. It is difficult to visualise a Sundar Pichai becoming a CEO of a company that routinely does that. Perhaps when Indian society and India Inc. move towards a less corrupt and a more transparent system, promotors could feel comfortable leaving professional CEOs to manage their companies even as they enjoy their wealth and pursue their personal interests.
Till then, success stories like Deveshwar and Naik would be few and far between. Of course, the public sector has seen dozens of iconic success stories in this field. Brand Amul was created by the leader of a government sponsored cooperative movement. For most of its life, Maruti has been helmed by professional CEOs. One of the biggest success stories is E. Sreedharan, the man who built the Konkan Railway as well as the Delhi Metro. But there is a secret behind the success of Sreedharan. He demanded and obtained complete operational freedom and autonomy while executing the Delhi Metro project. It is credit to both him and decision makers in the government that Sreedharan could chase excellence. It is difficult to visualise even private sector promotors giving professional CEOs the kind of freedom that Sreedharan enjoyed.
Will professional CEOs remain rare exceptions in India? For a while, that looks possible. But India too will change culturally and the day may not be far off when children of promotors find it more enjoyable and profitable to chase their own dreams while the likes of Satya Nadella sit in the corner office.