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In Demand | No time to play golf every day

In Demand | No time to play golf every day
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First Published: Sun, May 04 2008. 11 20 PM IST

Adil Zainulbhai, MD, India, McKinsey & Co. : “Unlike before, career opportunities for high-quality managers after 65 have grown substantially, especially in the last five years.”
Adil Zainulbhai, MD, India, McKinsey & Co. : “Unlike before, career opportunities for high-quality managers after 65 have grown substantially, especially in the last five years.”
Updated: Sun, May 04 2008. 11 20 PM IST
I am doing a lot more after retirement than I thought I would,” says R.C. Bhargava, former chief executive of Maruti Suzuki India Ltd. The 73-year-old is a consultant to several Japanese companies in sectors other than automobiles because of his association with Maruti Suzuki.
Adil Zainulbhai, MD, India, McKinsey & Co. : “Unlike before, career opportunities for high-quality managers after 65 have grown substantially, especially in the last five years.”
Since taking over as the auto manufacturer’s non-executive chairman in December, he has cut down board assignments from 14 companies to 10. He is on the boards of Grasim Industries Ltd, UltraTech Cement Ltd, Dabur India Ltd, Polaris Software Lab Ltd and a few other companies.
Seventy-year-old Kashi Nath Memani, former country managing partner and CEO of Ernst and Young India, thought he would have more time for himself when he retired four years ago. “But that is not the case,” says Memani, who is on the boards of several companies, including HT Media Ltd (which publishes Mint and (Campaign), Yes Bank Ltd, India Glycols Ltd and Shree Cements Ltd.
In addition, Memani serves as an adviser on a retainer basis for four foreign and domestic companies—he doesn’t want to disclose the names.
Arun Duggal, former CEO of Bank of America Corp. in India, works as an international adviser to General Atlantic Partners, a leading American private equity firm, and is on the board of companies such as Shriram Properties Ltd, Transparency International, Fidelity Fund Management Pvt. Ltd and Matrix Laboratories Ltd.
Sunil Alagh, former CEO of Britannia Industries Ltd, has a consultancy services firm, SKA Advisors Pvt. Ltd. Former Hindustan Unilever Ltd (HUL) chairman and a board director of Unilever Plc., Keki Dadiseth is on the advisory boards of Goldman Sachs and Marsh and McLennan Companies, and on the executive boards of companies such as Prudential Plc. in the UK, ICICI Prudential Life Insurance Co. Ltd, Siemens AG, Nicholas Piramal India Ltd and Godrej Properties Ltd.
Beyond retirement: (left) Former Maruti Suzuki CEO R.C. Bhargava; and former country managing partner and CEO of Ernst and Young India K.N. Memani.
Dadiseth is also an executive director at the Indian School of Business, and non-executive chairman of Omnicom Group Inc. in India.
These ex-CEOs may not be in the league of former General Electric Co. boss Jack Welch or Intel Corp.’s Andy Grove, but they are holding their own. They may not be heavyweight consultants like some of their counterparts in the US and Europe, but they clearly don’t see themselves playing golf every day. “Most senior executives have a productive career way beyond 65,” says Adil Zainulbhai, managing director, India, McKinsey & Co., a global management consulting firm.
Today, former CEOs continue to be busy after retirement and add value across a wider spectrum of companies, providing support to young entrepreneurs and non-profit organizations. “Unlike before, career opportunities for high-quality managers after 65 have grown substantially, especially in the last five years,” says Zainulbhai.
Since the situation isn’t the same as it is in the US, the notion of an all-powerful chief executive, too, is different. In the US, professionally managed firms account for the top 20% of companies in terms of market capitalization; in India, a smaller number of professionally managed companies are in the top heap. The top tier here is dominated by family business groups, only some of which have non-family members as CEOs and, to a lesser extent, public sector firms.
The powerful business-owner CEOs bring uniqueness to the CEO profile here. They are choosy about directorship assignments, and often remain involved in their own companies. “They are unlikely to be consulting other companies and, also, owner-CEOs don’t have a retirement age. They remain at the helm of affairs till their health allows,” says Bhargava.
Globally, especially in the US, money is not a consideration for most retiring CEOs. So, many former CEOs in the US venture into the fields of education, philanthropy, pursuing hobbies or just doing things that interest them. “Consulting or serving on advisory boards is not a fundamental career that they choose to follow,” says Zainulbhai.
In India, however, former chief executives from public sector companies would have the opportunity and interest to serve as independent directors on several boards and be advisers to private equity funds, multinational companies (MNCs) or entrepreneurs, says Zainulbhai.
The reason fewer ex-CEOs work as high-profile consultants in India is simply because there is less demand, says Anjali Bansal, country head, Spencer Stuart, a global firm specializing in executive search and board consulting.
But, the demand is growing here, too — and experts say it is because of a crunch in leadership talent. Clause 49 of the Securities and Exchange Board of India (Sebi) Listing Agreement has mandated the number of independent directors on boards, and that has increased demand.
What has also helped is that companies are now making concerted efforts to have good boards because they see an enhanced price multiple—the (share) price-to-earnings (per share) multiple is often used by analysts and investors to get a sense of whether a firm would make a good investment.
“Companies are looking at hiring quality people to fill their boards so that they can add value and play a far more strategic role in fulfilling a company’s long-term objective,” says Rajeev Vasudeva, partner, Egon Zehnder International, a global search firm.
To attract talent, companies are willing to pay anything between Rs25 lakh and Rs35 lakh a year for directors. The average compensation ranges from Rs5 lakh to Rs40 lakh a year. Boards in the US pay directors in the range of $75,000 (around Rs30 lakh) to $300,000. Bansal says a number of directors handle between five and 15 boards at any given time, since a good, active board does not take more than five days a quarter.
Directorship, says Vasudeva, is emerging as a post-, even pre-retirement, career. For instance, marketing consultant Rama Bijapurkar, who has her own market strategy consulting practice, serves as an independent director on the boards of several companies including Infosys Technologies Ltd, Axis Bank Ltd and Godrej Consumer Products.
Former Ernst and Young boss Memani agrees: “Anybody who has something to offer in terms of expertise, knowledge, skills and good connection is in demand. In that sense, old is gold.”
In addition, an increasing number of MNCs and private equity (PE) firms are seeking former chief executives for their knowledge, experience and expertise. “A lot of MNCs are hiring former CEOs as advisers to help them think through their India strategy and understand the nuances of the Indian market environment,” says Vasudeva. Public sector CEOs are highly valued for their experience and understanding of government policies. A retired Reserve Bank of India governor or a former Sebi chief will top the list in a board director search.
Moreover, experts say, former executives tend to be objective and dispassionate after giving up the reins of a company; this is critical for an advisory role. Talking about his association with HUL, Dadiseth says: “Once we walk out of the door, we cease to say anything about the company.” He adds, “I speak only when I am asked to. Stepping down is about relinquishing all powers and not meddling with the former company.”
Consulting opportunities have received a further fillip from companies such as BHP Billiton, Coca-Cola India, Cairn India and Textron Inc. that have openings in their India or international advisory boards. Though advisory boards need more commitment in terms of time than executive boards, they are preferred by former CEOs for the sheer challenge and larger role they offer, says Vasudeva.
The increased activity in the PE space is also seeing many of the younger CEOs joining PE firms in the roles of entrepreneur and resident. Vasudeva explains how the concept works. An ex-CEO comes on board as an adviser till the firm buys or invests in a company for a fee and, after the deal, either becomes the new company’s CEO or a stakeholder.
“Seasoned CEOs will be seen playing a stronger role in private equity companies as advisers as well as by being board members to their portfolio companies,” says Bansal.
In future, companies in India may even explore the possibility of taking retired CEOs as interim management executives. “We may start seeing former CEOs taking over as interim CEOs in the future as companies go through change and increasingly face talent shortage at the leadership levels,” says Bansal.
In the midst of all this, another trend is evident: early retirement. Unlike their predecessors, who served full terms, an increasing number of CEOs are opting out to pursue their interests. For instance, Ashok Alexander, former senior partner and head of McKinsey & Co.’s New Delhi office, joined the Bill and Melinda Gates Foundation in 2003 after having worked for 24 years in the private sector.
Last year, Nachiket Mor stepped down from the board of ICICI Bank Ltd to head the ICICI Foundation. Former global managing partner of Accenture Ltd, Sid Khanna, who has been advising executives on ways to run their companies better, set up a company last year that handholds middle-sized companies which have the potential to scale up but lack the management talent to do so.
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First Published: Sun, May 04 2008. 11 20 PM IST