a year and three months ago, in March 2002-so begins one of the
possibly-factual, possibly-fictional strands in the murky tale surrounding
the exit of Britannia Industries Managing Director Sunil Alagh-the
board of directors, chaired by Nusli Wadia, got a whiff of erratic
and frequent personal expenditure binges embarked upon by their
flamboyant, go-getting 56-year-old CEO. The expenses, goes the story,
were totally out of whack with what had been approved by the Chairman,
and allegedly included huge foreign exchange outgo overseas and
entertainment payments. Wadia's decision to elevate Senior Vice
President Nikhil Sen as coo on March 27 last year, say proponents
of this theory, was motivated by this knowledge. Another story doing
the rounds claims the dirt hit the fan in April this year when,
in accordance with US gaap convention, the top brass at Britannia
had to sign a compliance report, which stated amongst various other
things that their expenditure was for the good of the company. On
April 10, this version goes, Alagh was told to sign the report,
which he refused. That is when, the tale concludes, the board smelt
a rat, and decided to dig up Alagh's expenditure, for some reason
Sunil Alagh, Ex-CEO/Britannia
The long and short of that exercise according
to some of the numbers floating around is that of Mr and Mrs Alagh's
total expenses between 1994-95 and 2004 (till date) of Rs 5.4-odd
crore, only 1.78 crore was approved by the chairman. The remaining
Rs 3.64-odd crore-allegedly incurred on varied items ranging from
mobile phones to car rentals to alphonso mangoes to liquor to prawns-is
apparently what Alagh used to bankroll a no-holds-barred party over
the past decade. On June 4, Alagh was sacked as MD and CEO of Britannia
Industries. The official reason (as told to the stock exchanges):
Alagh, "as a Managing Director, had conducted himself in a
manner clearly incompatible and inconsistent with the duties and
responsibilities he owed as Managing Director... (and) had breached
the trust and confidence...reposed in him by the Chairman and the
board of directors...."
Alagh's may be a higher-profile exit of a professional
CEO in recent times, but he isn't the only one to have left abruptly
or before his tenure ended, or in a huff. In the West, few eyebrows
are raised when a head at the top rolls, simply because there are
so many of them rolling, as various studies reveal. In 2001, for
instance, more than 1,000 US CEOs were sacked. Not just that, two-thirds
of the world's major corporations have replaced their CEOs at least
once since 1995. If CEOs aren't being sacked, their tenures are
rapidly shrinking. Two years is considered long enough these days
for a boss to make a difference. Back home, that phenomenon is beginning
to play out as well, as promoters and stakeholders crack the whip.
Dilip Pendse, Sandeep Goyal, Ram S. Ramasundar, Ravi Deol, Pavan
Bhatia, and Deepak Chandnani, and at least one CEO of Fiat who obviously
didn't take to India too much are just some instances of CEOs whose
terms ended unexpectedly and rather abruptly. "As the divorce
between management and ownership begins to play out, this will soon
become a common phenomenon," says chartered accountant Shailesh
Haribhakti, CEO, Haribhakti group.
WHY CEOS HAVE TO GO
TAKES OVER: Magnetic
chairs, alphonso mangoes, wall paintings, prawns, liquor...we
all love them. Just keep a check on the tab.
JOB'S TOUGHER THESE DAYS...: Shareholder
value is the buzzword, and stakeholders are crying out loud
for performance, quarter after quarter.
THERE'S LITTLE TIME TO PROVE ONESELF:
The days of Jack Welch-like tenures at GE-or Russi Mody back
home in the eighties-may well be over. Today two years is long
Neither Wadia nor Alagh were available for comment
(a faxed request for a meeting with Wadia went unanswered, and Sanvari
Alagh, one of the former MD's two daughters, answered Alagh's mobile
phone, saying that he would not comment on the matter). And as to
just which of the stories and numbers floating around are true,
and which aren't, your guess is as good as ours. Indeed, the mystery
surrounding Alagh's messy exit, and the stories that purport to
detail the run-up to it do not end there. There's one that goes
that when the Danone representatives on the Britannia board (Wadia
and the French foods major jointly own close to 50 per cent of the
company) were told about the MD's alleged financial misdeeds, they
along with Wadia thought it fit to given Alagh an honourable exit-by
April 2004. What hastened the end remains a mystery. At the time
of writing, the Britannia board had decided to appoint an independent
firm, C.C. Choksi & Co., to undertake an independent examination
of relevant papers and material and to submit their report to the
If the stories floating around about Alagh's
alleged binge are even remotely true then the monies involved aren't
as important as the frequency with which he misused his office.
One detail concerns a personal party masquerading as a sales conference;
another, a distributor meet that never happened. Alagh also stands
accused of gold-plating branding and sponsorship deals with producers
for serials, a few of which had his wife as a co-actor.
Ram S. Ramasundar,
Whilst Alagh has chosen to maintain a stony
silence even as the accusations flew thick and fast last fortnight,
at least one of his friends came to his defence. Satish L. Maneshinde,
a Mumbai advocate who has represented Alagh on an earlier occasion-he
stresses that he's not going to be Alagh's counsel this time round-says
the board and the auditors owe an explanation to Britannia shareholders.
"What were they doing for all these years? When the financial
position of the company was put to vote, were they signing the balance
sheets blindly? This seems like a witch-hunt." Adds Sandeep
Farias, Head, Corporate & Securities at law firm Nishith Desai
Associates: "The board is considered as an overall supervisor.
It is important that appropriate supervisory procedures are put
in place in order to ensure that it lives up to its responsibilities."
At the time of writing, Maneshinde was threatening to give the story
a twist by saying he was considering representing "certain
shareholders formerly in control of the company, who had approached
him" to take action against the Britannia board.
Ravi Deol, MD/Barista
Sandeep Goyal, Ex-CEO/Zee
It's now up to C.C. Choksi & Co to do its
bit. To be sure, the former Britannia CEO isn't the first to feel
the heat from charges of financial chicanery. Just as Alagh was
at one time Wadia's blue-eyed boy (having played his part in ousting
former controlling shareholder, the late Rajan Pillai) Dilip Pendse,
the former Tata Finance MD, enjoyed the confidence of Ratan Tata.
Tata's trust was belied, as it seems is Wadia's. The similarities
end there. Pendse was slapped with charges of cheating, falsification
of accounts and criminal breach of trust.
Whether Pendse became the fall guy can't be
said for sure, but experts point out that India Inc is littered
with carcasses of CEOs who abruptly fall out with their promoters.
"Often owners almost act like a mower. Whenever the CEO raises
himself and the company into a new orbit, the owner feels threatened
and the CEO gets chopped off. That's when the real value of a professional
CEO is seldom understood," points out Sunit Mehra, Country
Head of headhunting firm Hunt Partners.
If you think Indian CEOs (or some of them)
lead extravagant lifestyles at the cost of the shareholder,
think again. Everything pales in comparison with the high-jinks
of a few CEOs in the West-particularly with the excesses of
one Dennis Kozlowski, former Chief Executive Officer of Tyco
|Enron's Jeff Skilling
|WorldCom's Bernie Ebbers
|Tyco's Dennis Kozlowski
The Enrons and the WorldComs may have all had their trysts
with corporate notoriety, but Kozlowski easily takes the cake-
make that a giant cake with exploding breasts, along with
one part of the male anatomy that normally isn't waved about.
That cake was reportedly a part of the $2.1-million party
Kozlowski had to usher in his wife's 40th birthday.
Kozlowski, needless to say, got the boot. (For good measure,
the Securities & Exchange Commission slapped the former
CEO and two others of the Tyco top brass with civil fraud
charges, for allegedly failing to disclose multi-million dollar
loans taken and, in some cases, never repaid).
Chief executives in India may just be beginning to come
under fire, but if what's happening in the West is any indication,
the heat has only just entered the kitchen.
Mehra adds that the concept of a professional
CEO is new to India. But then there are those promoters that appear
to already have had enough to do with them. Subhash Chandra, for
instance, after a longish experiment with professional managers,
has decided that the reins are best in his control. The founder-Chairman
of Zee Telefilms is now the hands-on CEO too. Another family member
Lakshmi Goel was appointed head of the news channels. Sandeep Goyal,
the last professional CEO to grace the Zee headquarters, survived
a little over a year, having made little progress in redeeming the
beleaguered broadcasting giant. Goyal declined to comment to BT
as he was still working with Zee in an advisory capacity.
Sometimes the vision of the CEO may be in total
divergence with that of the promoter, which actually can make you
wonder whether the latter was sleeping during the job interview.
Or perhaps he just forgot to ask that relevant question. Sometimes,
though, shareholders keep changing and you can't blame any single
party for the misunderstanding. Consider the case of Barista, which
has Tata Coffee as a 34.32 per cent shareholder and-not for too
long, though, he's off in August-Ravi Deol as its MD. The Tatas
were unhappy with Barista's losses and its business model. The Tatas
pushed for a franchisee-led expansion, which Deol was apparently
against, at least initially. Deol insists that his relationship
with the two major shareholders (promoter Amit Judge and Tata Coffee)
are "very fine", but sources point out there was a divergence
of view with at least one of them. Industry observers reveal that
one of the shareholders was keen to see the last of Deol. The official
line, according to Tata Tea (Tata Coffee is a subsidiary) Managing
Director H.R. Khusrokhan, is that "Deol completed his three-year
contract" and moved on.
Harpal Duggal, Former CEO and
Another CEO faced a similar fate. Pavan Bhatia's
18-month stint as CEO of Domino's Pizza India came to an abrupt
end in May 2001. His strategy for expansion (he quadrupled Domino's
outlets from 25 to 100 during his tenure) was junked by the company's
board, 'encouraging' Bhatia to leave. Bhatia was not available for
comment and Optimus' former CEO and Managing Partner Harpal Duggal
quit, claiming Polaris hadn't coughed up the promised sweat equity.
Of course, no promoter likes red on their balance
sheet. Chances are the rate at which that blot keeps expanding would
be in proportion to the number of headhunters the CEO sounds out.
Electrolux Kelvinator, for instance, was saddled with a Rs 144-crore
loss on a turnover of Rs 463 crore. Ram S. Ramasundar quit the company
after a five-year stint as CEO last November. The loss might have
been just one reason for his exit. "There were hidden liabilities,
bad debts, huge accounts receivables and bad stock," says a
top source at the company. AB Electrolux did not want his leaving
to be abrupt, and that's why Ramasundar was asked to fill the post
till a new CEO was found. Ramsundar rubbishes this theory. "I
had spent five years with the consumer durables industry and wasn't
happy with the growth rates. It was an unprofessional industry,
and I did not want to take all that stress and strain. I was asked
to stay back, in fact Electrolux was even considering a Far Eastern
posting for me, but I said no," he says.
Clearly, the CEO's perch has never been as
precarious before. Promoters are quick to clip wings of power-struck
professionals, the greedy have to now factor in audit committees,
disclosures and transparency, and what's more they'd be foolish
to expect the promoter to do a clean-up job when they dirty their
hands. At the same time, the job's getting tougher these days as
stakeholders bay for either performance or blood. And to top it
all the CEO doesn't have all the time in the world to deliver those
results. Still eyeing that corner room?
| WHAT RECRUITERS WANT FROM ASPIRING CEOS
THOSE HANDS CLEAN: A clean image right throughout one's
career is a must. Just being on business magazine covers isn't
enough (or is it?)
GET IN AND DELIVER: Today's CEO isn't going to be
around for ever. On an average he has two years to prove himself.
Five-year terms aren't to be taken for granted any more.
BE PREPARED FOR ONE-TIME ASSIGNMENTS: Willing to
turnaround a company in 18 months-not a day more? Perhaps
there's a mandate for you somewhere out there.
| A CEO'S SURVIVAL KIT
| IS IT WORTH IT: It's easy to (mis)use
power for material benefits when at the top. But think what
could happen to you-and your family-if the dirt hits the fan.
STRATEGY IS FINE, BUT PEOPLE MATTER TOO: Yes, you've
got it all figured out, but make sure you have the right people
around you-and treat them right.
KNOW WHEN TO LET GO: Fine, things aren't working
out. Don't waste time planning how to extend your tenure.
It won't work.