By Sonu Bhasin
Founder, Families And Business
It is in times of crisis that the true nature of an ‘owner of the business’ surfaces, when the question of stewardship — and whether it means anything to the business-owner — needs to be answered.
It’s a tale of two companies. Naresh Goyal started as a cashier in his uncle’s tiny travel agency and went on to build what used to be India’s most loved airline. Almost six years after Goyal launched Jet Airways in the early 1990s, 10 IT professionals left behind cushy jobs to launch Mindtree.
Both companies became known in their respective fields for their focus on customers, employees and service. The promoters of both Jet and Mindtree basked in the reflected glory of their companies and, keeping personality-driven traits apart, no one grudged them their spot in the limelight. Over the past few months, though, that limelight has turned harsh for both companies and their promoters.
Jet Airways has crash-landed in very choppy financial waters. There are lifeboats willing to lend a helping hand, but Goyal is unwilling. He fears, and knows, that accepting help comes with loss of control over his business. In fact, all extended hands have been categorical in their demand that Goyal dilute his own and his family’s shareholding and step out of all management matters. At the time of writing this article, the airline was days away from “total ruin,” as some newspaper reports have put it, but the promoter is unwilling give up control of business.
Matters are a tad different at Mindtree, though control of the business is the core of the problem here as well. One of the largest shareholder in Mindtree, VG Siddhartha, had been wanting to sell off his shares to meet financial demands of his other businesses. L&T was one of the companies interested in buying not only Siddhartha’s shares but also more from the open market to become a controlling shareholder.
The three founders who are still part of the business were appalled at the thought of losing control of the company they had built. They scurried around for other buyers to pick up Siddhartha’s stake. They wanted diverse entities as buyers so the founders could continue to hold the reins. After L&T did eventually buy Siddhartha’s stake, the founders announced their intent to launch a buyback offer in an effort to stall the takeover bid and retain control.
The financial imprudence of both companies is an issue of corporate governance. The example of Kingfisher Airlines is recent enough for all to know the consequences of promoters’ arrogance. The buyback offer of Mindtree is also being seen as arrogance of promoters who are using company money to hold on to individual positions in the management.
In this fight to retain control of the business, other stakeholders seem to have been forgotten by the promoters, as are the employees impacted directly by their decisions. Jet’s employees have reportedly not been paid salaries for months. Employees of Mindtree are going through their own insecurities. Their treatment is in contrast to the promoters’ stated position of, “We are all one family.”
In family businesses, in an ideal world, the promoter is not merely an owner but a steward of the business and all those within. Stewardship is defined as the careful and responsible management of something entrusted to one’s care and has been used since stewards managed estates. It is a responsibility given to the promoter and also an obligation for him to protect all stakeholders, especially those dependent on the business for livelihood.
Family business owners need a stewardship attitude in general and towards employees in particular. Further, stewardship can be demonstrated at both, the ownership and leadership levels. Most promoters are quick to espouse stewardship at the ownership level but lag behind at the leadership level. Stewardship at the leadership level is about viewing the family business as an opportunity to create value for others rather than an opportunity to build one’s own personal wealth, power and status.
There have been examples, though few and far between, where promoters and their families have demonstrated this behaviour. Two year ago, Pradeep Chona, second generation at Havmor, sold the ice-cream business to Lotte, the largest confectionery company in South Korea.
Though difficult, it was a well-thoughtout decision as Chona could see costs rising and profit margin decreasing, making it an unviable entity. As the family could see an adverse risk:reward ratio, they scouted for buyers. The Chonas insisted that retaining all employees for at least three years was part of any deal they would sign. Chona was quoted as saying they were apprehensive about losing their status as the owner, but were sure that if the business, and the stakeholders, had to survive, they had to let go.
Elsewhere in the world, Mitzi Perdue and her siblings, inherited Sheraton Hotel Group cofounder Ernest Henderson’s stake in the business in 1967. She says there were strong financial reasons for them to sell stake but the loss of their identity and power was an apprehension. Not wanting to throw away their father’s legacy — or employees to suffer — the siblings decided to sell to ITT in 1968. Today, Sheraton is one of the largest and wellknown brands in the hospitality industry, with over 1.5 lakh employees worldwide.
Unfortunately for them, it appears that Jet’s 16,000-odd employees and Mindtree’s 20,000 are not on the promoters’ radar.
Chanakya, author of Arthashastra, had kings in mind when he said, “In the happiness of his subjects lies his happiness; in their welfare, his welfare; whatever pleases himself, he shall not consider as good, but whatever pleases his subjects, he shall consider as good.” Employees of beleaguered companies would wish modern day business kings would heed the words of the ancient teacher.
(Apart from running an advisory firm, Sonu Bhasin is author of The Inheritors – Stories of Entrepreneurship and Success)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of