6/5/2023 0 Comments Figleaf poseSteps have been taken by regulators over the years to address some of the more egregious abuses of power. Of course, there are interest groups that try to act as countervailing forces. The scales fall from our eyes.ĪLSO READ | Lessons from the battle in Bombay House But once that thin veneer of gentility is stripped away, it allows us to glimpse the way companies really work. It is all too easy to go through the motions, tick all the corporate governance boxes on paper and even win prizes for it, as the Satyam fraud so cynically demonstrated. The other message is that corporate governance norms merely serve as a fig leaf to hide the brute reality of the exercise of power within a corporation and, through it, in society. Small shareholders can opt to vote with their feet, as they have done in the past few days. At best, company boards can aim for ‘democratic centralism’, the organizational holy grail of Leninist political parties. Notions of ‘shareholder democracy’ are fatuous. Power in a company depends upon the block of shares you control. As long as the dominant shareholders back him, there’s little to be done about it. This is not the first time an ageing patriarch refuses to go gentle into that good night, nor will it be the last. In short, Mistry is saying here that after stepping down as chairman, Ratan Tata became the eminence grise of the Tata empire.ĪLSO READ | Why Ratan Tata’s choice in Cyrus Mistry was a little too convenient That example and the manner of his sacking lend credence to Mistry’s claim of “alternative power centres without any accountability or formal responsibility". That conclusion is buttressed by Mistry’s letter, which cites an example: “once, the trust directors (Nitin Nohria and Vijay Singh) had to leave a Tata Sons board meeting in progress for almost an hour, keeping the rest of the Board waiting, in order to obtain instructions from Mr Tata". Whatever power Cyrus Mistry wielded in the past four years was on sufferance. In this case, the Tata Trusts are the dominant shareholder and Ratan Tata, as chairman of the Tata Trusts, has full control. What signals does the Tata boardroom brawl send out? The unambiguous message is that whoever controls the dominant shareholding calls the shots. Corporate governance is, at bottom, the way power is exercised over an organization.
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