Why capable, independent directors matter to effective corporate boards

Replete with personal experiences and anecdotes, this book is an important reminder of how a board should be

Uncharted Spaces: Reset the Agenda, Reimagine the Boardroom

by Shefaly M Yogendra

Published by Practical

Inspiration Publishing

208 pages      ₹986

 

Shefaly Yogendra’s slim book is a handy guide for serving and aspiring directors of corporate boards. It also provides plenty of guidance to institutions on the considerations that should go into constituting a future-ready board. While it deals with boards across the globe, its lessons are particularly relevant to India currently, given how spectacularly our boards and far too many eminent directors, both executive and independent, have failed to exercise the fiduciary duties expected of them.

 

More on that later.

 

Ms Yogendra draws extensively from her experience as a director on multiple boards. Her first board experience was as an executive director who set up a Swiss subsidiary for its multinational parent. The job entailed setting up and registering a formal commercial and legal entity in Switzerland from scratch — and building a board compliant with a complex regulatory regime. Since then, she went on to serve on boards from companies ranging from multinational financial institutions to high-profile charitable trusts.

 

Along the way, she got to work with some exceptional board chairs as well as some poor ones, and some outstanding directors as well as some pedestrian ones.  She had extensive conversations with them, and captured their stories and anecdotes that covered practically every gamut of company and board actions. She has distilled these insights in her book.

 

Slightly over half of the book is focused on her experiences with different boards. This is of immense use because she can give concrete examples for the points she makes. She uses case studies as well as short snippets to illustrate critical issues.

 

As her examples show, far too many boards, even at big companies, do not function the way they should. Boards are, after all, as good as the chair and the directors who have been chosen. Individual biases, ambitions, and foibles play a big role. In one example, she writes, the chair of the board had ambitions to be the CEO — which led to disaster.

 

For boards to function properly, you need directors who are not only good and willing to work as a team and conscious of the board’s responsibilities but who also bring specific special knowledge, experience or attributes to the table.

 

In some cases, one abrasive director can create problems for the entire board. Equally, a board where everyone is focused only on getting along and not bringing up different viewpoints is not a healthy sign either. Dissenting opinions are important as long as they do not lead to personal differences between directors.

 

Some board members do not prepare for a board meeting properly. And in some cases, the management does not provide the board members with the information they need to take a proper view.

 

The latter part of the book focuses on issues that companies and boards will need to debate and deal with in the near future — that is, if they aren’t already dealing with it. These include artificial intelligence (AI), the geopolitics of minerals and data, and rapidly changing global regulations — apart from war and similar issues.

 

The book could not have been timed better. Though it has few India-specific cases, reading it makes it easy to understand how dysfunctional and problematic some Indian boards can be — even when it comes to big companies. It also illustrates that illustrious professional careers do not guarantee a transition to good directors either.

 

This book is an important reminder of the actual role of an ideal board. Unfortunately, the Indian boards in news today have not covered themselves with glory. The Tata Sons board has always been made up of extremely accomplished professionals. And yet, the board hardly acted professionally during the bitter ouster of the late Cyrus Mistry, chairman of Tata Sons. The remuneration committee of the board had lauded his performance and recommended a hefty higher compensation for him only four months before the entire board turned on him. Nor does the current Tata Sons board come out looking good in the strange episode when it decided to give a fresh five-year term to its chairman, disregarding its own precedents and going against the express wishes of the person heading the Tata Trusts, which holds over 65 per cent share of Tata Sons.

 

Nor is it an isolated case. At different times, Infosys’ board of directors’ have taken decisions that might have suited its cofounders (all minority shareholders) rather than the company’s future. The boards of Satyam, IL&FS and Yes Bank allowed their promoters and managements to do as they pleased, with little scrutiny, ultimately leading to the companies’ collapse.

 

The problem with this extremely readable book is that while one appreciates what a good board should be, a lot of the advice is difficult to put into practice. After all, in the Indian context, one strong person, either the promoter or someone else, manages to pack the board with cronies — and thus the directors, even if eminent men and women, rarely do the job they are supposed to.

 

 

The reviewer is former editor of Business Today and Businessworld, and founder of Prosaic View, an editorial consultancy