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CORPORATE WORLD

Promoters unwilling to cede control:Survey

Staff Reporter, New Delhi
11/09/2017   0 Comments

India Inc is not ready yet to hand over complete management control to professional boards and managers and trust deficit is a prime reason for reluctance to appoint professional directors, a survey has said.
 
As  a majority of the corporate firms have promoters’ holding well over 50 per cent and even those with much lower stake are not willing to bet fully on professionals, an Assocham survey has said on Sunday. 

“An overwhelming majority of 78 per cent of the 155 CEOs both from professional and promoter-driven firms, answered in the negative when asked whether the promoters are willing to cede complete control of the corporate India to independent boards and CEOs,” said the survey.

Trust deficit and the family pre-dominance were the two of the main plausible factors coming in the way of transformation of India Inc where the day to day operations are insulated from the principal shareholders or group of shareholders like in the US. This has caused the drift between these two set of  people.

 It further said promoters can hav a say in a company run by professionals but through different channels.

“In the companies which are being run by the professionals in the US and some other developed economies, it is not as if the promoters keep completely away from their firms. Instead of direct intervention, the promoters’ oversight in those economies is through institutional routes like a strong regulator and tough disclosure norms, high standards of corporate governance and activism even on the part of retail and small shareholders who can hold the professional managers accountable from time to time,” said the chamber.  

It said 67 per cent of the respondent CEOs said trust deficit between the promoters and the professionals creep in even among the few promoters who have taken a lead for handing over their companies to the professionals. 

“On the other hand, over 75 per cent of the CEOs in the survey said, the family dominance is a major factor for keeping the professionals away from the top managements,” said Assocham. 

A majority of the corporate firms have promoters’ holding well over 50% and even those with much lower stake are not willing to bet fully on professionals.
 

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