The eight-member institutional committee, constituted to select a successor of SD Kulkarni, met last week and has prepared a brief -- in consonance with the new code -- to be given to a consultant which will be appointed soon for the L&T recast. Consultancy firm McKinsey has emerged as a front-runner for the assignment, sources said.

The committee, set up to identify the company's new chief executive, also plans to reduce the number of whole-time directors on the L&T board, have proportionate representation on the board among institutional nominees, appoint independent and professional directors and delink the non-core business from engineering andconstruction activities.

The consultant will look into things directly affecting the structure of the board as well as the operations of the company. The L&T board has eight whole-time directors and four FI nominees. "The new action plan for L&T sums up the broad application of the new code of corporate governance. It will be applicable to other corporates as well in course of time," institutional sources said. The institutions are taking a close look at the steady erosion in the share value of the company over the last three years.

The plan for L&T is part of the institutional strategy to intervene in any big or medium company where institutions have more than 15 to 20 per cent stake and the share value is declining. "We will not apply the code in those companies which are doing well," sources said. There is a thinking among the institutions that the company should not continue with some of its activities which account for less than 5 per cent of its turnover. The company has its core business inengineering and construction which needs to be further streamlined, sources said. Accordingly, the consultant will be asked to chart out the business strategy of the company along with identifying a new chief executive officer. The institutions has left the job of appointment of the consultant to the L&T board. The final decision, however, will be taken by the FI committee after the consultant submits its report.

"The institutions want to handle the entire thing in a professional manner. The structural and operational changes may create a backlash in the organisation," sources said.

The institutional committee comprises nominees of Industrial Development Bank of India (IDBI), Unit Trust of India (UTI), Life Insurance Corporation of India(LIC) and General Insurance Corporation of India (GIC).

Besides, Reliance Industries is being represented by Anil Ambani in the committee. Reliance Industries holds a 9 per cent stake in L &T. Financial institutions jointly hold around 36 per cent in the company.Industrial Development bank of India (IDBI) has its nominee on the L&T board by virtue of being the leader of the consortium with the largest loan exposure in the company.