Hierarchy vs 'unutilised' expertise? Mukesh Ambani’s youngest son on Reliance board

Anant Ambani

By NS Venkataraman*
Recently, big controversy arose over the proposal to appoint Mukesh Ambani’s youngest son, who is said to be just 28 years old, on the Board of the family controlled Reliance Industries Ltd.

A share holders services company has expressed its concern about appointing a person with little experience in the board of a large and technologically advanced company and has asked the share holders to vote against the proposal.
Of course, one can be sure that the family controlling the Reliance Industries would somehow ensure that such appointment would be done, just as the fact that other siblings of the family who are also not adequately experienced have entered the board of group companies..

The question is whether such appointments to the top posts, which are very critical for the optimum management of the institution, should be done on the basis of family connection and blood relations, overlooking the claims of the professionals with proven skill and long period of experience and expertise in the relevant fields.
A number of such private sector companies which are operating in industrial and commercial fields are public limited companies with large portion of equity share being held by individuals and financial institutions, who are not part of the family, which control the management of these institutions.

In all such cases, it can be seen that the stakes of the non-family equity holders and the financial institutions who have extended equity and loan to the companies, are much larger than that of the family members who have much less equity share and nevertheless who are controlling the companies in day today management and in chalking out the short term and long term policies of the companies.
When in such large private sector companies, which are public limited companies, the succession for the management of the companies is based on blood relations rather than the expertise and competence of the persons, obviously the future prospects of the companies and their growth may run the risk of suffering considerably, due to the lack of adequate expertise of the family members who are vested with the authority and responsibility.

Norms should be evolved stipulating certain level of experience and qualification to occupy positions on the board of directors

In such conditions, it is often seen that senior engineers, technologists and management professionals with proven experience of even thirty years and more, are forced to report to youngsters coming from the family, who are yet to acquire high skill and expertise.

There are some cases where the experienced worthy professionals are unwilling to accept such conditions which they may consider as humiliating and leave the services once for all. There are many organisations in India whose progress have suffered due to such reasons.
As efficient functioning of public limited companies are necessary for the economic and industrial growth of the country, it is necessary that some norms should be evolved, stipulating certain level of experience and qualification to occupy positions on the board of directors of the companies.

This would ensure that blood relations do not become the be all and end all factor for occupying such board level positions in public limited companies that are in private sector.
In India, it appears that in almost all private sector companies, the level in the management hierarchy up to which the professionals can move become limited, in spite of their expertise and capability.

This is a negative trend, where valuable experience and knowledge level of senior professionals go unutilized in top management practices, which ultimately impact the overall industrial growth of the country.
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*Trustee, Nandini Voice For The Deprived, Chennai

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