TCS: A diverse, focused board
3 min read 10 Dec 2012, 01:31 PM ISTThe current TCS board has guided the company to deliver strong shareholder returns while mitigating risk
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Over the last four decades, Tata Consultancy Services Ltd (TCS) has grown to become a more than $10 billion company with more than 250,000 employees. TCS has always been India’s largest IT services provider, but until the beginning of the year, Infosys Ltd had more shine, almost succeeding in dimming the achievements of the larger rival. But all that seems to be in the past, at least for now, as Infosys and Wipro Ltd grapple with weak US and UK markets and pricing and leadership issues.
TCS is now clearly acknowledged as the country’s IT bellwether and has managed to maintain its lead with good volume growth and operating margins. It has also realized the importance of consulting work and non-linear or non-headcount related solutions to shore up revenue and margins. It has set up a mobility division and templated many of its solutions so that it can replicate them across clients and geographies.
As a leader in the Indian outsourcing space, it is also setting the pace of integrating with the global environment. As of 31 August, 31.7% of its workforce comprised women, which reflects gender diversity, and its employees (TCS calls them associates) come from 108 nationalities. Of course, Indians still comprise 92.3% of the workforce, but with the company setting up more centres in the US and in European countries, TCS is bound to see a more globalized workforce that will help soften some of the misconceptions and criticism over outsourcing companies depriving Americans of jobs.
TCS has done well in the governance space too. Based on the composition, reputation and financial, as well as board participation, data, the company was considered to be one of the best managed boards in India, according to Aon Hewitt.
The constitution of the board, according to Aon Hewitt executives, ensures significant diversity in the range of experiences and cultural backgrounds of its directors.
The current board has been consistent for almost 10 years and in that phase has guided the company to deliver strong shareholder returns while mitigating risk. Board members are not allowed to participate in more than 10 company boards or committees apart from TCS, thereby ensuring greater focus on the company, note the Aon Hewitt executives.
There’s high participation by all members in the board and committee meetings reflected by attendance records. It has a strong mix of skill sets across different geographies and cultural contexts that enables the company to reflect priorities across the countries where it operates.
For instance, Clayton M. Christensen, an independent, non-executive director, is the Robert and Jane Cizik professor of business administration at Harvard Business School, with a joint appointment in the technology and operations management and general management faculty groups. His research and teaching interests centre on managing innovation and creating new growth markets. And Ron Sommer, another independent, non-executive director, was chairman of the board of management of Deutsche Telekom AG from May 1995 until he retired in July 2002.
The board’s capabilities are reflected in the fact that TCS witnessed a very smooth and professional transition when it elected a new chief executive officer, or CEO, in N. Chandrasekaran.
It was in the early part of 2008 that speculation began about who would succeed S. Ramadorai as chief executive. Ramadorai had been its public face for many years, but he was turning 65 in 2009, which is the retirement age for all Tata chief executives.
Several names began to do the rounds, but insiders knew that TCS also stood for ‘Take Chandra Seriously’. They were not off the mark. Chandrasekaran, now 49, took over as the managing director and chief executive officer from Ramadorai on 6 October 2009.
Chandrasekaran is third in the line of TCS CEOs after F.C. Kohli and Ramadorai. His predecessors were industry heavyweights and the promoter, the Tata group, gave them a free hand to manage the affairs of the company. This distinction is important because TCS’s peers, including Infosys, Wipro and HCL Technologies Ltd, all have promoters or large shareholders in executive positions.
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