Our board sets the tone for the company: G.V. Prasad
Dr Reddy’s CEO talks on enabling the conditions in which board members are fully engaged with the company
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Bangalore: G.V. Prasad, vice chairman and chief executive officer of Dr Reddy’s Laboratories Ltd, spoke in an interview about enabling the conditions in which board members are fully engaged with the company. Edited excerpts:
What is the broad philosophy that guides the board?
The board has multiple roles. The popular notion of governance, of course, is one of the most important aspects of a board’s role but beyond governance the board has other roles too. It is the ultimate policy setting body, and also sets the tone for what the company stands for and how employees behave.
The tone at the top is really set by the board. In our case, I think we have been lucky to have a very engaged board that is deeply involved in multiple aspects of the company. It does not just meet once a quarter, pore over the results, approve them and go over important significant developments and approve resolutions—that is one part of it. In our case, the board is deeply engaged in building a great company. I think the board plays a very active role in highlighting areas to focus on for the organization, understanding what the context of the company is, help shape the strategic agenda of the company.
How do you maintain this level of engagement?
First of all, you have to have good individuals on the board—people who can make a difference, I think that is the first step. Dr Reddy’s is lucky to have some very intelligent, wise, energetic and visionary people at the board level. So you give them enough information, you give them access to key executives, you keep them briefed at regular intervals. If something happens, we pick up the phone and organize a conference call (don’t just wait for quarterly results).
Our board, for example, spends two days (meeting) every quarter. The first day is full of committee meetings, which happen in parallel. We have an audit committee, a risk committee, a science, technology and operations committee and nominations and governance committee. We also have a shareholder grievance committee and investment committee based on how capital is deployed and employed. Having a board is one, creating the enabling conditions for them to be fully engaged is another, and thirdly creating enough structure and forums for them to shape the organization are three important things that have helped us.
You had a performance evaluation of the board sometime in 2010. What is it that you evaluate and how do you measure the efficacy?
We got feedback of each of us as board members; about what our peers think of us, what team members think of us, and how we contribute to the company—positives and areas of improvement, etc. So we had a good reflection of our own contribution to the board and probably a mirror held to our blind spots. We have also restructured the way the board functions to make it more efficient and I think it has helped us to organize ourselves much better. We do this exercise once in two or three years.
How do you create a framework for best practices at the board level and more importantly how do you ensure participation from all stakeholders, including employees, shareholders, etc.?
We don’t follow any best practices blindly. We look at all governance practices that governments have put in terms of disclosures, etc., and adhere to them. Beyond that, we also try to leverage our board in many ways—for the growth of the company. We use their counsel and this helps in the evolution of the company. In terms of disclosures to the board; in terms of processes, we are compliant. But compliance doesn’t build a great company. So I am not a fan of best practices or simply ticking checkboxes. The board also has access to all top-tier managers fully, they can independently pick up the phone and talk to anyone. As part of these processes, each committee has an anchor in management, not just me and Satish Reddy (managing director and chief operating officer). We also organize informal dinners for the senior management to interact with the board.
What are your views on the proposed Companies Bill, which talks about no stocks for non-executive directors and a cut in tenure for independent directors?
I don’t think working for a fixed period of time makes a director less independent or otherwise. I also don’t understand the logic of not giving stock. It doesn’t make a difference. Great board members don’t come for money. They come because they want to make a contribution. It’s not a very important thing but of course we have to pay well—either in stock or cash. We have to respect their time.
One of the top concerns of boards globally is leadership development and mentoring.
It is selective because not every executive wants a mentor but for those who want a mentor, we have some board members interested in doing so. For example, Kalpana Morparia mentors Umang Vohra very actively, Umang is our CFO (since appointed executive vice-president and head of North America generics business of Dr Reddy’s). She also provides some mentorship to Saumen Chakraborty (CFO). Tino Puri (formerly of McKinsey & Co) is a mentor for me, I have learned a lot from Tino in the way companies evolve, are managed, the area of leadership and strategy. Ashok Ganguly (chairman of ABP Pvt. Ltd, independent director on Dr Reddy’s board) has been a great mentor in terms of how to build excellence in operations and he added a lot of wisdom for us.
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