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Boardroom Strategies
Renuka Ramnath
Founder, MD & CEO, Multiples Alternate Asset Management
INTERVIEW • 6 min read
Renuka Ramnath has successfully built a multitude of companies as a business leader, investor and board member. One of the most respected leaders in the industry, Renuka’s unique vantage point across different boards and functions and the sheer depth of her insights is staggering.
Q1. You have served on the board of various companies over many years, both as a nominee director and independent director. Could you please talk about your own boardroom style in both these situations?
A: The role of a director on the board of a company, as prescribed under the Companies’ Act, comprises principally the following
- Acting in good faith to promote the objects of the company and the interests of its stakeholders
- Exercising skill, reasonable care, diligence and independent judgement
- Avoiding conflict of interest
It is a fiduciary role taking accountability towards all stakeholders of the company. I do not believe that the role and responsibility of a director is any different depending on the causation of the appointment, i.e. a nominee of a shareholder or a debt provider or an independent director. I do however believe that the boardroom styles do differ where companies have one controlling shareholder as opposed to a very diversified shareholding. Very often, the boardroom style is also that which is embraced by the controlling shareholder.
Speaking about my personal style, I love to be a part of boards which have a holistic involvement in all the aspects of the business, such as the strategy, key people decisions, capital allocation, risk management, and governance. I believe that a board is a teamwork, much like how the executive management of any company is also a teamwork. I feel most comfortable as a director on boards which have board sub-committees, especially the audit committee and the nominations and remunerations committee, with appropriate composition of members who bring both professional competence and the conviction to stand their ground and not look upon themselves as serving any one stakeholder.
For me, the story is just as important as the metric and the intent is as important as the content. I enter a board with a genuine desire to understand the business with a holistic perspective. I like to build a relationship with the management team such that they see me as a partner, not as a supervisor, so that they feel comfortable to share their dilemmas without fear that it may be used against them. I operate from a maxim that boards should not operate with suspicion but rather with trust, allowing for the management to function with enormous elbow room to run the business. I find that a board is most effective when they build a deep connection to the business and the management and yet distance themselves enough to be able to give unbiased and comprehensive direction.
When we are living in a rapidly changing world, especially with exponential growth of technology with an ability to disrupt incumbent business. Therefore, as a director, I like to challenge the management with unexpected questions to test their agility and see if they freeze or rise above it in a collaborative and imaginative way.
In fact, I recall a fun incident at a board meeting of a portfolio company that we owned the controlling stake in. The team had prepared extremely well so I knew that the presentations would be of high quality. When I reached the venue, I don’t know what struck me - I told the team that I would read the presentations in my room and instead, the team should take an hour to think about where the company would be 5 years down the lane.Within an hour, they had created a clear vision of where they see their company in 5 years. They even had a caricature of their CFO with a balding head! I was happy to see that the team had lived up to my expectation that they have a strong ability to take charge of completely unexpected situations. It’s been 15 years, but the team still recalls that experience when we meet!
Q2. The role of independent directors has evolved over time – they are expected to play a diligent and vigilant role and have statutory liabilities if they fail to do so. Since independent directors do not actively participate in the day to day operations and may not fully understand the business, how does the mechanism work?
A: The job of the operating management and the job of the board is clearly delineated. The only area where I have strong objections is in holding the board responsible for operational lapses which are sometimes so removed from the purview of the board that it is impossible for the directors to take responsibility. I would very much welcome unequivocally a statutory change that would do away with responsibility on independent directors for normal routine operating matters.
As far as the statutory obligations are concerned, including true and fair representation of the financial statements of the company, legal compliances, and long-term sustenance of the company, I feel that the obligations of a director can be well served by sharing the responsibilities at the board level through appropriate committees as prescribed in law. As long as boards are constituted with multiple members who bring in the necessary domain and professional experience and an attitude to deeply engage and serve the stakeholders, it is possible to deliver on the expected responsibility. Meaningful engagement of the board / sub-committees of the board with key personnel manning the control/audit functions of the company is extremely critical.
I am of the firm belief that the role of the director goes well beyond the perfunctory act of checking boxes. In order to fully deliver on the responsibilities of a director, it is crucial that one asks questions, poses challenges and seeks clarification from the management when required. In my own experience, on multiple occasions where I was serving as an independent director, I have brought about a positive change in deepening the engagement of the board with the management by raising the bar on the preparation, thought process and accountability of the management. My experience suggests that being a demanding board member with the right intentions has always been received by the management and fellow directors as a welcome change.
Q3. You have been associated with both conventional companies with a long operating history and new age companies/start-ups. How different are the boardroom strategies and dynamics if we were to compare the two?
A: The stark difference I see between the two boards is this – Conventional companies have well-established processes in terms of the management of the business and the risks associated with it and the governance of the company. Typically these boards have many continuing members who have adapted to work as a team and have established a rhythm of holistic governance. In these boards, meetings tend to revolve more around financial performance, transparency in reporting, and comparative evaluation with both the peer set and the company’s own previous quarters.
In contrast, the role of the board of a new-age businesses is to supplement the management in building sustainable business and governance practices. The core management in a new-age business is almost always acutely focussed on the evolving landscape of the market, responding to threats from new entrants, leapfrogging to grab new opportunities, invariably using technology and shifting the business paradigm, particularly to make the incumbents redundant. Given the constantly evolving landscape of a new-age business, the board must be comfortable with rapid changes in business plans and demonstrate agile dynamism. The management has little time or inclination towards establishing processes of the board. I would consider that the job of the board in a new-age company is to actively complement the management and bring focus on people, processes, internal financial controls, risk management and governance processes. This way, the board and the management can work complementarily to ensure sustainability of the company.
The boards in new-age companies also spend substantial time in looking at the finances and fund-raising activity of the company. How to allocate the limited resources to build value in the company and how to keep a keen eye on the volatility and opportunity that financial markets present to raise money in a timely manner becomes an extremely important job of the board. Typically, an early stage company’s board comprises of the founders/key management team members and investor representatives. It is rare to see independent professionals on the board. I am a strong advocate of bringing independent board members on these boards at the earliest possible instance to ensure that the board works in the best interest of all stakeholders and achieves a necessary balance in the interactions.
In summary, the board of a new-age company is a partner to the management in building the company for long-term value creation while the board in a mature company is mostly responsible for ensuring continuity of good governance.
Q4. Based on your experience, how has the role of women evolved as a director of a company? Do you feel companies are keen to appoint women directors based on their expertise or is it still majorly to comply with diversity requirements?
A: Firstly, the initiative of SEBI to make appointment of at least one woman independent director mandatory on listed company boards progressively is an excellent move and I would like to compliment this action. What came as a regulatory requirement opened up the talent pool for corporate India. While the initial push came from complying with the regulation, with the experience of companies with women directors over the past decade many of the corporates have used this opportunity to get the right talent for their board and clearly it is no longer a check in the box. Many of the sectors in India such as banking, pharmaceutical, technology services have been equal opportunities employers and have a significant talent pool of women who possess the capabilities and confidence to serve as independent board members. Over the years, you can see that they have indeed been outstanding board members, voicing their opinions and making a difference to the companies. In summary, the legislations have been a game changer for corporate India that allowed a vast pool of high quality talent to be assimilated and included in the governance of companies.
What I have observed in recent times is that boards have appointed not just one woman but you can find 2-3 women on the boards. This is a good sign as corporates are bringing in multi-dimensional talent on their boards and are more ready to appoint women. In my opinion, the majority of the women have taken on their responsibility independent directorship as a responsibility just as a male director would.
However, I suppose the experience of women independent directors for the board would still be a mixed bag. And we should allow for time, experience, and more talent to have the opportunity and view it as only a good beginning of the journey. I also feel that much of the talent comes from financial services, which is natural and we need to expand the talent pool to include women from various sectors and functions. There are many initiatives to train talent and fill this gap and we need to empower more women to embrace this opportunity. And finally, the role of women as a director also is a function of who the woman is rather than who the board is. I would urge women to be confident, assertive, ensure that your voice is heard. Once appointed she has an equal voice as anybody else on the board irrespective of gender.
Q5. Three words to sum up your experience serving on the board of various companies?
A: Stretch – I stretch the imagination and potential of the company to allow them to accomplish much more.
Strategy - Setting the long term agenda and strategic direction of the company firmly in place is very important for me. We need to know the direction in which we are taking the ship, and why.
Leadership in the business you are in – There should be a strong desire to be a leader in their respective space.
Q6. Companies, Indian or global, that you would like to be a board member of?
A: World class consumer companies and technology companies are exciting for me.
Q7. Top 3 skills a board member should possess?
A. Understanding the Business
B. Understand the People behind the business
C. Understand the Numbers