The Hindu : Business : Sanmar opts for Group Corporate Board

Online edition of India's National Newspaper
Friday, Jul 30, 2004

Business

Business

Sanmar opts for Group Corporate Board

By K. T. Jagannathan

CHENNAI, JULY 29. In one more giant step towards corporate governance, the family members of the Chennai based Sanmar Group have disengaged from the day-to-day management of all operating companies.

N. Sankar, his brother N. Kumar and Sankar's son Vijay Sankar have all quit the boards of all operating outfits, clearing the final hurdle, if any, for professionals to manage the group entities.

Even as they have entrusted the operational tasks to professionals, they have constituted a Sanmar Group Corporate Board, akin to the one floated by the Murugappa Group. The Sanmar Group Corporate Board will comprise internal members as well as outsiders. Besides family people, managing directors of some group outfits will form internal members of the Corporate Board. Mr. Sankar will be the Chairman of the Corporate Board and Mr. Kumar Vice-Chairman. It will also have Mr. Vijay Sankar. M. N. Radhakrishnan, Managing Director, Sanmar Engineering Corporation, and P. S. Jayaraman, Managing Director, Chemplast Sanmar have also been inducted into the Corporate Board.

V. Narayanan, former Chairman and Managing Director of erstwhile Pond's (India), Adit Jain, Managing Director, IMA India, Preety Kumar, Managing Director, Amrop International India, Pradip Kapadia, Advocate, Gagrat & Co., and Ashok Wadhwa, Managing Director, Ambit Corporate Finance, will be external directors on the Corporate Board. A couple of industry specialists will also be inducted soon to beef up the board. Mr. Narayanan will chair the audit committee of the Corporate Board.

Policy-making body

The Corporate Board is expected to function as a sort of macro policy-making body. It will be empowered to oversee activities of all constituents of the group. It is expected to convene every quarter for stocktaking of varied activities of the group. Mr. Sankar asserted that the members of the family would operate only at the Sanmar Group Corporate Board level.

An internal Corporate Management Board (CMB) of an informal kind had been functioning within the Sanmar group for quite sometime now, facilitating interface between the promoters and the operational heads to paper over issues relating to HR (human resources) and the like. The newly set up Group Corporate Board, however, will function as an overall policy-making body. In the case of the Murugappa Group, family members still hold Chairman or Vice-Chairman positions in operating units even while letting professional managing directors to run the daily show. While establishing Group Corporate Board sometime in late 1999, the Murugappas had gone in for a `mentoring model' where each family members will guide individual units towards achieving the goals set by the Corporate Board. In Sanmar model, however, the individual entities are left at the hands of professionals.

Following the decision of the promoter family to keep an arms' length relationship with the group businesses, the board of the group's flagship Chemplast Sanmar is recast. Mr. Sankar, Mr. Narayanan, Mr. Kumar, Mr. Adit Jain, Mr. Vijay Sankar and Mr. Kapadia have all stepped down from the board. All of them figure in the newly constituted Corporate Board. Further, N. Srinivasan has also quit the Chemplast Sanmar board.

Delinking ownership

The reconstituted board of Chemplast Sanmar will comprise Managing Director Mr Jayaraman, M.K. Kumar, C. H. Mahadevan, V. K. Parthasarathy, and V.V. Subramanian.

Chemplast Sanmar is the only listed company in the group. Mr. Sankar said as the Group Corporate Board comprised people from diverse fields, their experience and knowledge could be utilised to drive other unlisted outfits of the group. Asked on the role of his son in the new arrangement, Mr. Sankar said working with experienced experts in the Corporate Board would keep him in good stead to view things from a larger perspective.

In August 2000, the Sanmar group took the first step towards delinking ownership from management by letting non-family members to take over the managing directorship of four core businesses of the group. The move was then viewed as a serious attempt by promoters to bring about greater transparency in the functioning of the group with attendant responsibility. Both Mr. Kumar and Mr. Sankar then felt that it was the best way to institutionalise management practices.

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