The book, Inside the Board Room, represents a compendium of real-life situations that confront every stakeholder of a firm. Spread over 12 Chapters it seeks to prise open the black box of board room behaviour and offers practical guidance and perspectives to both newcomers and seasoned operators.

The best part of the book is that it “guides” more than “prescribes” and is bereft of tall motherhood statements. Every statement is backed by examples of real-life situations. Timing wise the arrival of this book is perfect since it is the culmination of a decade of the law dealing with independent directors in India. In short it is time for serious stock taking which is the objective of the book.

The Vedic exhortation of “doing well by doing good“ is the leitmotif of the book, covering all chapters with due emphasis on process plus behaviour. It starts with the story of the epic Mahabharata and superimposes those characters beautifully to the players in the board room while advocating the need for a ‘fly on the wall’ consultant.

The use of the medical term ‘prodrome’, which refers to early warning signs or symptoms and its application to real-time board room situations - that it should never be ignored or missed out - is the strong message that is sent out in the context of corporate failures and frauds. The authors point out that NASA (HST), Volkswagen and Wirecard governance failures are all relatable to boards ignoring the prodromes of peril. They exhort the boards to not only watch out for such warning signals but also prepare contingency plans based on them.

Healthy CEO tenures

The chapters dealing extensively with CEOs - hiring, conduct and firing - are all gripping, focussing on the problematic issues faced on the ground. Boards should be conscious of CEOs desire to pursue Efficient Solutions (short term) rather than Effective Solutions (long term). The authors feel that a healthy CEO tenure should be less than 10 years and more importantly the board should be proactively involved in the selection of the CEO. The commentary on “succession planning“ (a subject haunting corporate India today) is dealt with through a telling statement, “Clean succession requires the choice of the successor to be clear along with the predecessor departing gracefully. If either falters the process may collapse.”

There are countless cases of either one or both faltering in the Indian context. One of the key mantras among several listed in the book for independent directors is “to disagree without being disagreeable.” A profound statement loaded with delicate practical difficulties on how to do so during crunch times? On board effectiveness the authors suggest that the collective impact of the board must be greater than the individual impact of each director. To achieve this the evaluation metrics have to factor the conduct and behaviour aspects in the process. Clearly, there is enough work to do in this space to make it operational and effective.

The litmus test faced by directors, regulators and auditors is detection and dealing with corporate frauds. The authors navigate this topic with consummate ease by bringing out the subtle distinction between- vichaar (intent) and aachar (conduct). Decoding of these are imperative to arrive at whether it is a “failure“ or a “fraud”. The chapter on “wisdom“ nudges companies to bring more wisdom in board room discussions and not merely showcase competence which is any case a “given”. “You cannot be trained to be wise but you must learn to be wise,“ is a powerful statement.

Whistleblower impact

The subject of whistle blowers is explained with two interesting examples where, in one case, the promoter, Ratan Tata himself, was the whistleblower in the infamous Tata Finance fraud in 2001, and in the other where the independent director group, in a step-by-step process, turned whistleblower in the CG Power fraud case in 2019.

The authors have debunked the concept of board room diversity which is focussing on the narrow canvas of gender diversity. They believe that board diversity is all about “embracing differences“ and “more perspectives” which are so important, particularly in dealing with unexpected crises and events. Will a typical family-owned corporate board and promoter accept the above prescriptions of board diversity?

Incidentally the authors feel that the concept of a “promoter” has outlived its utility and is no longer relevant in the regulatory scheme of things. The chapter on ‘the emerging role of future boards’ has to be read multiple times over. The role of the board being that of a map (traditional and short term) as against a compass (futuristic and long term) is a clear pointer on the way forward. The need to implant the right human value systems early in corporate life is emphasised repeatedly in the book - a virtue so vital to the impatient and “valuation-driven” start-up India.

(The reviewer is a chartered accountant)

Check out the book on Amazon

About the book

Title: Inside the Board Room: How Behaviour Trumps Rationality

Publisher: Rupa Publications

Authors: R Gopalakrishnan and Tulsi Jayakumar 

Pages: 224

Price: ₹595