Supervisory Board To Monitor Eicher Group

The Eicher group yesterday unveiled a new corporate governance structure under which it proposes to constitute a group supervisory board of six-eight eminent personalities.

The supervisory board will monitor the operations of the group so as to bring an "objective perspective to decision-making".

The board of directors of Eicher Goodearth, the holding company of the group, yesterday approved the structure of the supervisory board at its special meeting held in New Delhi on Monday.

The company has elevated group vice-chairman and chief executive officer (CEO) Subodh Bhargava to the post of group chairman, who will retain the position of CEO, too. The chairman of the group, Vikram Lal, yesterday stepped down as chairman to join the supervisory board. Lal and his family are the majority shareholders in Eicher Goodearth.

The company has, so far, nominated former Hindustan Lever chairman S M Datta and former SCICI vice-chairman and managing director N C Singhal to the group supervisory board.

Explaining the rationale behind setting up the supervisory board, Vikram Lal said: "In today's business environment, a high degree of professionalism is needed to achieve long-term objectives. This requires a proper relationship matrix among various segments of the company -- the supervisory board, the management team and the shareholders." He said there should be a group of people with an objective view on the performance of the company. The role is to be played by the group supervisory board, "whose membership would be fully de-linked from the operational responsibilities. Supervision of the management is done best by people other than the managers."

At the board meeting, Lal outlined the role of the supervisory board as to ensure implementation of the group's vision to become "truly global".

The group, through effective monitoring of progress towards achieving the its mission, will ensure that the interests of all shareholders are taken into consideration at all times, he said.

Besides, it will oversee all legal and ethical issues, formulate policies for group equity structures, diversification and divestment, and assess the performance of the top management. "A management, that can take an external perspective of the internal processes, can provide more value to shareholders by making the decision-making process objective," said Subodh Bhargava.

Members of the supervisory board will spend "two-three weeks a year reviewing the performance of the group", said Lal. The management board, to be headed by Bhargava, will consist of all the whole-time executive directors and develop common policies for the entire group, while the boards of each business will comprise all the whole-time executive directors of the unit concerned.

The Eicher group, which started as a single product (tractors) company, has diversified into the manufacture of light commercial vehicles, motorcycles and automotive gears, management consultancy and exports.