The showpiece of any corporate head office building is the board room. Whether the company is flourishing or not, the board room is resplendently panelled and fabulously furnished. Flower-bedecked, richly carpeted and huge in size, it leaves nothing to be desired.
And the hospitality while the board meetings are in progress stints nothing in sumptuousness either. And, of course, a fat fee awaits every external director for the strenuous labour he puts in by virtue of his mere presence; he is put up in a five-star hotel, with every comfort for the asking, and provided with a chauffeur-driven limousine.
When the suited, booted, perfumed corporate potentates emerge gaily chattering from a meetings just concluded, they might have already passed crores of deals, and agreed to acquisitions, and mergers. Or, they might have taken the company down the drain and to the cleaners!
That’s it. There is not only magnificence, but a mystique, mystery and magic attached to the proceedings in that room. The most interesting of all is the role played by the Chairman. Is he the first among equals? Is he a constitutional figurehead, managing time, maintaining order and keeping the focus on the agenda? Or, does he come with a definite idea of what to get out of the meeting and assertively have his way?
And the directors! How industrious, studious, scrutinising, clued up and involved are they? With all those fat fees, and constant pampering, how frank and forthright in expressing their opinions are the external, so-called independent directors? Has there been any instance in corporate history of any director insisting on the minutes recording his disagreement with a decision being taken?
So far as I can make out, there has been no case-study of what precisely goes on inside board rooms. The only material on which an impression can be formed is in the form of agenda papers and the minutes. On sensitive items, even these are drawn up in short, staccato and cryptic language.
The reason is the same as the one that applies to Cabinet meetings: The desire to preserve secrecy in sheer self-interest. Laying bare the inter-play of personalities and individual preferences and reservations, will only complicate matters if any controversy breaks out or court action is to be faced.
And, if it is a family business, the mystery further deepens. The records may not be in the public domain, the meetings themselves may be held haphazardly with no properly framed agenda and clearly enunciated rationale for proposals, with the prevalence, additionally, of an atmosphere of noblesse oblige, or, simply, a free-for-all.
It is time the manoeuvres and dynamics of boardrooms were taken up for a detailed study, based on surveys of opinions of observers from the inside and outside, and on the correlation between the credentials of the members and their contributions, on the one hand, and between the nature and background of the decisions and their consequence, on the other hand. Having been a member of three boards, and chairman of three more, in the public sector, I think the corpus of literature on corporate management will be hugely enriched by such a study.
For instance, I am perhaps the only chairman who voluntarily got worker-directors inducted into the board of an enterprise. I found them to be the most diligent, thorough and responsible of the lot. Overruling the strong objections of the “gentlemen-directors”, I even made one of them the chairperson of a Committee to recommend the compensation packages of different grades of personnel. The recommendations of this committee, contrary to the fears of partisanship and an extravagance, were balanced, reasonable and acceptable.
The only consultancy firm in India that has a comprehensive charter for undertaking a detailed diagnostic exercise on the functioning of corporate boards and advising on better practices leading to improved performance is Excellence Enablers launched by the former Chairman of the Securities and Exchange Board of India (SEBI), M. Damodaran.
A novel approach it adopts is to invite to its workshops reputed and seasoned persons who have been on, or have chaired, good and bad boards and combine within themselves the experience of handling problems relating to both public and private sectors, preferably with a certain degree of familiarity with the working of boards abroad. It goes into questions such as the composition, the manner of induction, board-management relationship, clarity in the objectives and functions of the firm, succession planning, the training of directors and other issues having a bearing on performance.
Damodaran will be doing a public service if he periodically shares the findings from these exercises.