The complete man & woman: Lessons from Raymond | Mint

The complete man & woman: Lessons from Raymond

Raymond CMD Gautam Singhania. Photo: Bloomberg
Raymond CMD Gautam Singhania. Photo: Bloomberg


  • The challenge for the board is: can they be fair to the non-promoter shareholder and safeguard the long-term interests of the company?

The recent developments at Brand Raymond highlight a shift in focus from the company's iconic "complete man" to a narrative more about the "man and woman". The plotline here seems to focus more on human nature rather than the sartorial elegance their core product is renowned for, navigating challenges beyond fabric and fashion.

Some commentators have questioned: Is this a case of karma catching up? What you do to others, will be done to you, in some form or time? This reflection arises following the father-son and the associate’s company ownership spat that played out in the group just a couple of years ago. Now, juxtaposed with this, is the latest marriage-breaking-up public drama.

The private lives of individuals involved, particularly in a marriage, deserve respect. However, when these personal issues spill over into the management and governance of a publicly listed company, it becomes a concern for investors. The harshest price is paid by those who don’t have a direct say in this matter - the shareholders. The company's market-cap ranking, not in the top 300, contrasts with the company's larger-than-life brand imagery.

Typically, at a workplace, if a woman alleges abuse, the POSH committee of the company handles the issue. Shouldn't a promoter-woman director’s public allegation against her husband, the MD in this case, be heard? The board has been silent so far. Surprisingly, the stock exchanges who are the first line of regulatory defence seem to have not asked questions about the various allegations around the MD of the company - the promoter himself.

A proxy advisory firm has written a letter to the independent directors of Raymond  to probe into the allegations against the CMD Gautam Singhania, made by his estranged wife and fellow board member Nawaz Modi, and ask both of them to keep off the board during the investigation. She has also alleged that her husband has misused company funds.

While the board of the company is expected to discuss this, it is a tough ask. In the Indian listed entities, especially among the top 500, a common feature is the dominance of promoter-led management. These companies often operate under the significant influence of founders or promoters who have historically played a central role in shaping the company's path. However, a notable issue arises when independent directors express dissent or disagreement within this structure. Instead of being viewed as a safeguard for the enterprise, differing opinions are sometimes seen as disloyalty to the promoter.

This perspective hampers the effective functioning of independent directors, limiting their ability to fulfill governance responsibilities objectively.

The larger challenge for the board is: can they be fair to the non-promoter shareholder and safeguard the long-term interests of the company? Do they have the courage to ask both the promoter-directors to step aside from their roles, until an independent enquiry into the allegations are conducted?

Sebi’s old idea

One of the ideas that Sebi can consider is mandating that if a promoter's stake exceeds a certain threshold, the chairperson should be a non-executive independent director. Firstly, it serves to enhance corporate governance by introducing an independent voice at the highest level of decision-making. This separation of roles aligns with global best practices and mitigates the risk of potential conflicts of interest, ensuring that strategic decisions are made with the broader interests of stakeholders in mind.

Similarly, drawing a parallel with the banking sector's rule of separating the roles of the chairperson and CEO underscores the importance of such segregation. This practice has been instrumental in fostering transparency, accountability, and effective oversight in the financial industry. Extending this principle to other sectors, especially where promoter stakes are significant, can fortify governance structures.

The fact that Sebi had initially proposed such a regulation, only to witness dilution due to industry lobby and supposed political intervention, highlights the challenges in implementing governance reforms, concerning promoters.

Nevertheless, reinstating and enforcing this regulation would signal a commitment to fostering a corporate environment that prioritises fairness, impartiality, and prudent governance over short-term interests. It would demonstrate a dedication to safeguarding the interests of investors and the market as a whole.

In light of the fact that two-thirds of the top 500 listed entities are promoter-led, internal family disputes and personal issues, including those arising from marriages, have the potential to hurt all shareholders. Promoter-family dynamics can introduce uncertainties that may impede effective decision-making and create instability within the company, thereby affecting overall shareholder value.

Independent directors must recognize that their role extends beyond mere regulatory compliance; rather, it encompasses the critical responsibility of preserving enterprise value. This is particularly crucial in the context of minority shareholder protection.

While adhering to regulations is essential, the overarching goal should be safeguarding the interests of all shareholders, with a focus on sustaining and enhancing the long-term value of the enterprise.

Independent directors serve as guardians of minority shareholders, ensuring that strategic decisions are made with a clear understanding of the potential impact on shareholder value. This is a lesson for the ID community, from the issues at the Raymond Ltd & promoter family.

Srinath Sridharan is policy researcher & corporate advisor.

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