Commentary/Yazad Darasha

Jingoistic, nationalistic affections ought to have no place in corporate culture

Yazad Darasha begins a new column with this open letter to ITC Chairman Yogesh Chandra Deveshwar, that upholder of all things Indian -- including corporate control.

Dear Shri Deveshwar,

I am a shareholder of ITC Limited, and I am not, unlike you (going by your public proclamations), too proud right now to be an Indian. You say you are proud to be an Indian in charge of an Indian company -- and I believe you. After all, you are your mentor's amanuensis, of sorts. Or should we simply call a spade a shovel and refer to you as a parrot?

After all, that is exactly what you are doing -- parroting what your predecessor Shri K L Chugh had said about not giving up control of an Indian corporate entity to a predatory transnational wolf.

Not that I had agreed with him then. As I do not agree with you now.

Why? Simple. I would rather be a shareholder in a corporate culture that is cleaner than what our -- yes, our -- company has demonstrated under Indian management.

Actually, I had wondered why Shri Chugh had displayed such a vocal aversion to handing over equity -- and, subsequently, also probably management -- control to British American Tobacco. His tirade against BAT had worked then for the simple reason that he had appealed to jingoistic, nationalistic affections that ought to have no place in corporate culture. And especially not in a company where Shri Chugh was nothing but a glorified employee.

He did not own the company or any part thereof, as the lawyers would say. So why was he protesting so loudly about a foreign takeover? It stank at that time, as it does even now.

Hindsight is a wonderful tool to put all the pieces in their places. And hindsight tells us that what Shri Chugh must have been really worried about is an exposure of all the violations of the Indian Foreign Exchange Regulation Act that ITC was allegedly committing under his so-called management. More so because an internal audit by BAT had already revealed some parts of the iceberg.

How deep that iceberg really is, we know today.

BAT had every reason to initiate that financial audit. As the single largest shareholder in ITC -- holding 32 per cent of the company -- it was only protecting its investment. Which is more than we can say for the Indian financial institutions who had lent ITC money.

I can also understand the Indian institutions's nominee directors's aversion to allowing a BAT takeover. Not only did their resistance glorify them as protectors of Indian corporate culture, but it also preserved their cosy relationships with the management of the company -- of which, let us not brush aside, you yourself were a part before you went and took over Air-India (look what a hash you made there, but that is beside the point).

Now you are doing a replay of the stand that the Great Indian Corporate Mogul, Shri Chugh, had taken, hoping you too will get away with it. And considering the mood of the term-lending institutions, you might just.

Now that would be a pity.

As a shareholder, I for one would certainly rather own a part of a company managed in a truly professional way. And BAT holds out promise in that respect. Besides, I, as a retail shareholder, have been burned so often by Indian managements that the idea of being part-owner -- never forget that is exactly what each shareholder is -- of an ITC that is still managed by the same ilk of Chugh-ites is rather abhorrent.

I had felt virtually the same way when the Mafatlals played the Indian card to keep multinational Shell from grabbing a controlling stake in NOCIL. Also when Swraj Paul was shut out of DCM. Both times, jingoism won out. And the shareholder lost. Look at NOCIL's share price today.

The only difference in those cases was: NOCIL and DCM are owned by family groups. And they had every right to protect their investment, especially considering they -- or their forebears -- had built the companies from scratch and did not want to hand them on a platter to any predator that came along. Okay.

But what stake do you, Shri Deveshwar, or Shri Chugh have in ITC? You are only hired professional managers, paid monthly salaries by the real owners -- who are BAT and the small shareholders. In fact, your continuing insistence that ITC 'remain Indian' (whatever that may mean in face of the fact that the single largest shareholder is non-Indian) implies to me that you are doing a Chugh -- that is, trying to hide something!

Besides, have you consulted the small investors -- who as a group hold the largest chunk of ITC's equity -- before deciding that BAT should be bowled just because it is not Indian? Do your statements imply that if an Indian conglomerate were to raid ITC, you would lay out a scarlet carpet?

Of course you would not. Aren't you too busy protecting your own turf, where you have -- by one means or another, jingoism or something else entirely -- made yourself absolute monarch?

And how do your small shareholders feel about this? Or do you care at all? Well, if you do, this epistle might give you a rather rude awakening. It is one thing to sway AGMs in your favour -- the institution of proxy voting has a lot to answer for. It is quite another to believe that you will forever get away with murder -- murder of the shareholders right to a good management at least, if not of a whole corporate culture and the ITC brand equity.

Yours sincerely

Yazad Darasha

Yazad Darasha, consulting business editor, Rediff On The NeT, will contribute a weekly column to the Commentary section.