Wednesday, Dec 08, 2021 08:00 [IST]

Last Update: Wednesday, Dec 08, 2021 02:25 [IST]

Why does the wealthiest businesswoman need to understand the difference between a promoter and a CEO?


A while back, one must have seen and heard about Falguni Nair, the promoter of the beauty e-commerce company Nykaa. Falguni Nair has become the richest self-made businesswoman in the country due to the phenomenal success of her company's IPO. Falguni Nair has even surpassed Biocon's female founder Kiran Mazumdar Shaw in terms of wealth. Her total assets valuation has exceeded 56 thousand crores rupees.
But if we look away from these figures for a moment, it is expected that she will professionally run her company. She will also have to take great care of the interests of the shareholders of her company and prioritize their well-being. Now Falguni will have to stop running her company like a family-business shop. A singular glance at the Nykaa’s board will fill one with utter disappointment.
Apart from her, Falguni's husband, Sanjay Nayyar, her son, and her daughter are a part of it. In a board of 8 members, half of the members belong to the same family. If this isn't a prime example of familyism, then what is? Will the blame for familyism continue to be limited to political leaders? Falguni Nair has to understand that any company is successful only when it is run in a professional and structured manner. Only then does a company gain its due share of credibility, respect, and stature, otherwise not. Successful subscription of an IPO doesn't mean that the company has achieved everything. To make a company or group truly successful, it takes a continuous string of unfettered hard work and struggle. For this, the best professionals have to be appointed in important positions.
The promoters of a company like Falguni Nair’s will have to seriously consider the appointment of a professional Managing Director / Chief Executive Officer (CEO) immediately. It is the professional executives who have to implement the vision of the promoter and the board of the company. Apart from India, this is happening in the best companies all over the world. Sundar Pichai in Google, Satya Nadella in Microsoft, Indra Nooyi in PepsiCo became CEOs. These are just a few examples that prove that even top-tier companies have understood the difference between a promoter and a CEO.
If one talks about India in particular, promoters and CEOs are distinct individuals in Tata (N Chandrasekaran), Mahindra & Mahindra (Dr. Anoop Shah), Infosys (Salil Parekh), Bharti Airtel (Gopal Vithal), Godrej (Vivek Gambhir), etc. There are dozens of similar examples. If one looks at those groups in which the distinction between a promoter and a CEO is defined, then it becomes evident that the promoters of these companies are visionary.
The Founder and Chairman of Microsoft, Bill Gates's objective is not just to make money. The same can be said about Ratan Tata. They provide guidance to their managers and CEOs while explaining and teaching them the prerequisite of running a successful company. They simply don't sit on their CEO's head round the clock. The same applies to our very own N Narayana Murthy, Anand Mahindra, Shiv Nadar, and Deepak Nair (HDFC Bank). All of them keep their families away from their companies/groups. No family member is appointed to the post of CEO in their businesses.
They are ardent believers in the fact that a company can only be run in a professional manner. That is why they are widely respected and recognized. Deepak Nair appointed Aditya Puri as the CEO of HDFC. Aditya made HDFC gain a strong footing among the top-tier banks of the nation. The job of the promoter is to find the best professionals. Falguni Nair will have to learn from these stalwarts of the corporate world. Surprisingly, Falguni Nair, who herself has had a long experience in the banking and corporate world, is still running her company in the style of a grocer.
Yes, right now we only look at promoters of groups like Bajaj Auto, Hero Group, Doctor Reddy's, and Sun Pharma. But, no one can deny that they are also doing way better. Changes may take time to come around because the old system has been in play for a long time.
However, Falguni Nair's venture is entirely new. As a startup, she should have set an example and won the admiration of the entire corporate world. But, she has filled her board with her husband and children. Even though no one can question the ability of her husband or her children, it doesn't send out the right message.
Everyone knows that after the economic liberalization, a new class of entrepreneurs is emerging in the country. Like Falguni Nair, Kalpana Saroj's story is also unique. She is a Dalit and the President of Kamani Tubes. She has previously been honored by the Dalit Business Chamber. Even after coming from the lowest strata of the caste system, she made a place for herself in the world of business and commerce.
In the corporate world, there are very few self-made women. Usually, the promoters of companies appoint their wives, daughters, daughters-in-law to the corporate board. The truth is, there are very few women like Falguni Nair, Kiran Mazumdar Shaw, or Kalpana Saroj in India. In a way, they also act as ideal role models for others. Having been inspired by their success, many other women would think about starting their own business.
That is why the media gave so much prominence to Falguni Nayar being the richest woman in the country. Her beauty e-commerce company Nykaa will continue to grow and prosper if it gets sound and professional leadership. Now it depends on Falguni Nair how professional she makes her company. She has to remember that inspired by her success, several young people, especially women, will go on to become entrepreneurs. The nation will keep a close track of her every step.
(The writer is a senior editor, columnist, and former MP. The views expressed are those of his own)

Sikkim at a Glance

  • Area: 7096 Sq Kms
  • Capital: Gangtok
  • Altitude: 5,840 ft
  • Population: 6.10 Lakhs
  • Topography: Hilly terrain elevation from 600 to over 28,509 ft above sea level
  • Climate:
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  • Winter: Min- 0.48°C - Max 13°C
  • Rainfall: 325 cms per annum
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