The Role Of Chairmen In Itcs Predicament

The juncture is critical. BAT Plc, the UK-based parent company, has been demanding a recast of the management structure where the chairman will not have executive powers. It wanted the post of chairman to be split into a non-executive figurehead and a chief executive who is merely a first among equals.

The current chairman and his predecessor have successfully managed to defeat this plan with the support of the financial institutions. But the raids have, once again, brought the whole issue into focus.

If the allegations leveled by the directorate can not be proved, then the debate on creating a new chief executives post may die down once again, said an ITC insider. The question is whether such an issue be resolved on the basis of personal roles of former chairmen, he said.

 

There was a time when the ITC chairman could do no wrong. The company grew from strength to strength under them, and nothing, it seemed, could shake the complacency of Virginia House. There was no effort from BAT or any other shareholder for alternate management structures.

BAT, which has 32.79 per cent stake in the company, may rethink the nature of ITC chairmanship now, with three topnotchers facing trouble. At present, chairman is aided by a vice-chairman and a deputy chairman.

The recast plans faced strong opposition from the then chairman, K L Chugh, who was backed by the financial institutions in his fight against the parent company.

The FIs control 34.86 per cent in the tobacco major.

The role of the FIs, with their continuous backing of Chugh, proved not only crucial. They seemed to have succumbed to Chughs swadeshi card.

Charges against Chugh had started to pile up through internal and external audit committee probes. Interestingly, the boards audit committee which comprised BAT as well as FI nominees had exonerated Chugh of Fera violation charges for which he was arrested.

Chugh brought in Y C Deveshwar in 1993, then on deputation to Air India as its managing director, as the vice-chairman and heir apparent.

The appointment of Deveshwar created a major rift on the ITC board, as BAT wished to take control at this stage and to have its own nominee heading the board.

Chugh had Deveshwars support in his fight with the parent company to preserve the Indian character of its management. The fight snowballed. During his stint in Air India, Deveshwar had become close to the FIs which had continually opposed BATs dominance on the ITC board.

Deveshwar was not on Chughs side in the fracas. He was perceived to be becoming closer to BAT. However, the consensus is that Deveshwar was always his own man.

When Chugh stepped down, Deveshwar moved into the top slot despite the fact that Richard Pilbeam and Norman Davies, then BAT nominees, opposed his candidature. He, however, did win the battle with the support of the FIs.

On taking over charge of the company, Deveshwar resisted moves to restructure the top slot. This heightened his confrontation with BAT. He is firmly in the saddle now, but some ITC insiders suggest he is not fully secure in the hot seat.