When CEOs act like politicians

Corporate leaders are looking a bit like political leaders these days. The views of most parties and their MPs depend on whether they are in Opposition or are part of the political group running the government.

Learning from such parliamentary traditions, directors and CEOs of companies seem to be adopting similar tactics. In two recent cases, directors and CEOs of companies have found much to complain about only after leaving the company. When they leave the company, they criticise decisions that they were party to.

Former CEO of Infosys, Vishal Sikka, found fault in the company only after he resigned. And Cyrus Mistry, who was on the board of Tata Sons from 2006, criticised its decisions after being removed from its chairmanship.

In his resignation letter Sikka said, “This continuous drumbeat of distractions and negativity over the last several months/quarters, inhibits our ability to make positive change and stay focused on value creation. Addressing the noise by itself is damaging; hundreds of hours of my own time has gone into this recently.” Sikka knew that he had to deal with founders who were passionate about the company. As a CEO, he was accountable to decisions taken by the company and had a choice to be more transparent. The Panaya acquisition was criticised by co-founder NR Narayana Murthy and he has questioned corporate governance. Murthy is upset that the investigation reports were not made public even though the management said there was nothing wrong with the deal.

Now the composition of the Infosys board is being changed to make way for another co-founder Nandan Nilekani to return as non-executive chairman and lead the company out of this mess. Apart from Sikka, the other three who have left the board are R Seshasayee, Jeffrey Lehman and John Echtemendy. In the next few weeks further changes to the board are expected. What should not be expected though is a fresh round of allegations against the management by former board members.

Surely, all professionals have a right to express their views freely and frankly after they are relieved of their official responsibilities, but for them to turn against the decisions that were taken in their tenure would amount to deep hypocrisy.

Chairmen, CEOs and board members have a responsibility that holds longer than their tenure in a company. If they take credit for good decisions that benefit the company long after they have exited, they must also share the burden of decisions that may not have turned out well. Boardroom decisions are largely collective. It is at the point of taking a decision that a member has to commit to the effort. Unless there is reason to believe that board members were misled or didn’t have adequate information, they can’t blame others for decisions that caused losses.

Cyrus Mistry alleged, for instance, that Ratan Tata misused amendments in article of association of Tata Sons. But the National Company Law Tribunal (NCLT) rejected this argument by questioning the role of Mistry. The NCLT said that Mistry had the right to attend board meetings and oppose change in articles of association. Similarly, Mistry’s allegations on alleged financial misadventures in Air Asia were also rejected by NCLT. Mistry was questioned why he didn’t raise a stink while he was on the board of Tata Sons for five years. Similarly, the accusation that Tata acquired Corus Steel in 2007 was mala fide does not hold water. To criticise the decision 10 years after, and that too when Mistry was part of the Tata Group when the decision was taken, shows him in poor light.

Mistry’s allegations against Ratan Tata look increasingly of a person who is absolving himself of his own role in decisions taken in his tenure. Decisions thus taken, which are found objectionable, must be responded to immediately. Any CEO and board member has a right to oppose and place a dissenting note on record. They can even choose to resign from the position if they don’t agree with a decision.

Across corporate India there are other such examples where CEOs change their tune once they leave the company. Sure, part of this can be explained by their freedom to speak out after exiting a company, but much of it is about laundering their role in dubious decisions.

Board members and senior management can’t behave like political parties — supporting a decision when in a position of power, and then rejecting or criticising it after losing their pedestal. CEOS and boards have to be accountable to stakeholders even if these include aggressive founders.

True corporate governance lies in taking responsibility and accepting accountability for board level and management actions. They shouldn’t be like politicians who decide to oppose everything that they supported while in position of power.

The author is an economic analyst, adviser, and writer who focuses on technology, globalisation and media.
Views expressed are personal.