Column : Everonn needs you, Dr Irani

As the law does not distinguish between the executive and non-executive directors when it comes to determining penal consequences, it is easy to empathise with Dr Irani. He will surely be thinking that any CEO who can bribe the taxman to suppress income is also likely to have cooked his books. As there is no knowing how muddy the waters are, it?s best to step away than to dive in. So Dr Irani will be worrying about his liabilities under the ?Companies Act?. While this is set to change under the new Bill, today the law does not draw a line between executive and non-executive directors; given this asymmetry in roles and responsibilities, non-executive directors risk being harassed by the ?system?. But is his stepping off the board in the best interest of Everonn?s shareholders?

At this stage let me digress. In 1991, US treasury deputy assistant secretary Mike Basham learned that Solomon Brothers, a bulge bracket Wall Street investment firm, had been trying to corner the government security market by submitting false bids in an attempt to purchase more treasury bonds than any one firm was permitted. What really annoyed the treasury department was that when this was originally discovered and brought to the attention of John Gutfreund, Solomon?s CEO, he did not immediately suspend the rogue trader. This angered them enough to want to shut down Solomon. It was only after Warren Buffet, a large shareholder in Solomon, met with treasury officials that they agreed to keep the firm alive. Buffet then became chairman for a while to help solve the problems and repair its image. (Solomon was fined $290 million for stepping over the line, John Guetfreund lost his job, and the firm was weakened enough to be sold to Travellers Group. But this is for some other time.)

Closer both home and time, when the Satyam scandal surfaced and its board resigned, the ministry of corporate affairs? first act was to appoint an independent and trustworthy board, which was tasked with digging the company out of the hole. They lent credibility and stopped the company bleeding employees and contracts. In fact, it can be argued that the board injected so much credibility into Satyam that even though the company was unable to finalise its accounts, it was able to find a buyer.

This brings us back to Everonn and Dr Irani. Who today is better placed than Dr Irani to assume stewardship of Everonn? Having been Everonn?s chairman, he will know its long-term strategy. Being the manager that he is, he will also know its nuts and bolts.

In the last two years, the National Skill Development Corporation (NSDC), a public-private partnership, has signed agreements to train some 57 million people over a decade, in an array of sectors. It has widely been reported that Everonn has an agreement with NSDC to train 15 million people, a little over one-fourth of the entire programme so far. The company?s ability to deliver on its commitments to NSDC is important. NSDC, after all, is part of a national skill development mission set up to fulfil the growing need in India for skilled manpower across sectors and narrow the existing gap between the demand and supply of skills. Dr Irani has run a complex business successfully, has years of experience and also has something which very few Indian CEOs have?a huge amount of goodwill. His name would attract the right talent and his guidance would have ensured that correct processes are put in place. In fact, his continuance may well ensure that the NSDC contract is not cancelled. Clearly, his is the safest pair of hands. The Companies Act needs to let him extend them.

The author is with Institutional Investors Advisory Services, an advisory firm dedicated to providing participants in the Indian financial markets with independent opinions, research and data on corporate governance issues