INSUBCONTINENT EXCLUSIVE:
By Andy MukherjeeA smug, entitled business class driven by greed and hubris, but sorely lacking in resources to legitimize their control
I could be describing the India Inc
Founder Naresh Goyal neither brought in enough new equity of his own to rescue the debt-laden carrier, nor did he allow a timely sale to
suitors who wanted the business, albeit without him
wants brothers Malvinder and Shivinder Singh arrested
Complicating matters, Malvinder has accused Shivinder of siphoning funds from the family holding company and diverting them to a spiritual
feudal system of corporate governance on capital formation, job creation and growth
Yet the last major reform was in 1969, which ironically was also when India was nationalizing banks and lurching toward a more virulent
Subsequently, globalization caught up with India, the economy opened up and attracted hundreds of billion dollars in foreign capital, but
the foundations of corporate structure stayed weak
The 70 companies in the Tata Group were run by nine agencies, while 49 firms in the Birla Group were managed by 13
They were vehicles for business families to extract commissions and control empires in the garb of providing managerial expertise.
Andrew
As the names suggest, the managing agencies started out as part of the British colonial project, but about a hundred years ago ownership
started to pass into Indian hands
India eventually outlawed managing agencies in 1969, but entrenched families lost no time in gaming the corporate boards that were now in
Mindtree with a $1.6 billion hostile takeover
Mindtree founders are first-generation entrepreneurs
You can imagine the sense of entitlement that may be felt by the more pedigreed families that control 60 percent of the assets of publicly
In the 1970s, William Meckling and Michael Jensen studied the friction between managers and a diffuse United States -style shareholder base,
whereas in Asia, the main issue is concentrated ownership and expropriation by insiders whose political connections get them bank loans.
A
Recently, Indian banks did an out-of-court settlement in Sterling Biotech Ltd., taking a 65 percent haircut while handing back control to
to tap the bond market more often, and cut their reliance on banks
Starting next month, India also aims to empower independent-minded boards to check self-dealing by promoters
conflict-of-interest case, and kowtowed before Ravi Parthasarathy, the founder of now-insolvent infrastructure financier ILFS Group
How can they take on powerful insiders with real money and connections
For fundamental change, business families must stop playing a shadowy
But the opposite is happening
These bonds contributed 31 percent of the money political parties raised last financial year from unknown sources
institutions and economic opportunities tightens
The new boxwallahs will be much harder to shake off than the old cronies.
(This column does not necessarily reflect the opinion of
economictimes.com, Bloomberg LP and its owners)
