Violence is not civil. And those who condone it are as guilty as those who commit such acts. Where does this place corporations on the governance front when people in leadership roles are involved in such acts? That is the question being asked after the bitter spat between Raymond Group promoter Gautam Singhania and his estranged wife Nawaz Modi Singhania came to light.
While no one has the right to meddle in the personal affairs of individuals, when a public law enforcement institution like Mumbai Police gets involved, the matter becomes a public issue, especially when at the centre of it is also the ownership of a publicly listed company.
So, while no one has the right to judge who is right or wrong because they are not privy to all the facts, and they should refrain from commenting on the matter just like Gautam Singhania pleaded in his November 13 tweet, there is a delicate matter of governance of Raymond in light of these developments.
— Gautam Singhania (@SinghaniaGautam) November 13, 2023
Here, while the stance of law is ‘innocent until proven guilty’, good governance follows the ‘suspect until proven innocent’ principle. As such, morally and in the interest of good governance, a “suspect” should be distanced from any active role till the matter is resolved.
PRECEDENTS OF ACTION
While that is a general principle, the question people ask is whether there is a precedent of such actions by boards in cases related to marital feuds of leaders. Here my Googling produced limited results. Most instances of boards removing leaders from their positions relate to misgovernance, cheating and fraud in the company.
The other big reason is sexual harassment or violation of the relationship policies in the workplace. Here, there are examples plenty. Besides the infamous Harvey Weinstein who was accused by several of sexual harassment, Steve Easterbrook of McDonald’s was fired for a relationship with another employee, Travis Kalanik of Uber was removed following accusations of sexual harassment, as was Mark Hurd of HP, even Brian Krzanich of Intel and Phaneesh Murthy of iGate faced similar charges.
But there are a couple of instances that have a closer bearing. Gurbaksh Chahal the founder of internet ad firm RadiumOne was sacked for beating his girlfriend. Dan Price of Gravity Payments was fired for assaulting a woman after a dinner meeting. Even Ford Next’s CEO Franck Louis-Victor was booked for beating his wife.
These examples clearly indicate that instances of domestic violence by leaders are not new in the corporate world and there must be precedents globally of actions taken by boards in response to them that experts in the field must be privy to.
But what impact do such acts have on businesses and stock prices?
HISTORICAL IMPACT AND CHANGING TIMES
An interesting study published by David Larcker and Brian Tayan of Stanford University in the Harvard Business Review in 2016 has some interesting findings.
In instances of illegal actions of CEOs, most boards conduct an investigation and if the allegations are verified, corrective action is taken, mostly leading to the CEO being sacked. The same does not hold true for “questionable” not “illegal” acts. Under the former circumstance, the decision is based on the merits of each instance.
On the outcome, their study revealed that the impact of misbehaviour on corporate reputation was significant and long-lasting, but there was no uniform impact on stock prices, and in some cases, the stock even reacted positively following the news. They also noted that CEO misbehaviour can reverberate across the organisation.
But that was 2016. In 2023, with social media being what it is, the impact can be far more damaging. In the case of Raymond, especially so, given how it projects to be a brand that stands for all that’s noble and good in “The Complete Man”. Already the jibes have started, and these could pick up as things unfold. Here’s one:
Throw out your parents.Throw out your wife.Beat up your daughter.Raymond - The Complete Man.
— Maheshwer Peri (@maheshperi) November 22, 2023
Ironically, on Women’s Day @TheRaymondLtd tweeted: “Saluting the bold hearts & the beautiful minds, the endless spirit & the infinite compassion. Happy Women’s Day!”.
The Raymond stock price is also reflective of this concern, having dropped from over ₹1,900 to under ₹1,650 in the past 15 sessions.
GENDER DIVERSITY IN FOCUS
At a time when regulators and the world are debating how to make the workplace more inclusive and the presence of women on boards of companies is being given added attention, an incident of domestic violence by a leader of a larger business house does not sit well.
Just this concern, and the message it sends to women in the corporate world and in the Raymond workplace, should be reason enough to spur the independent directors on the board into action. Even institutional investors who have become more active in governance matters need to take note. All this espousing ESG and diversity on boards can be seen as just lip service if prominent investors don’t step up to the plate in such instances. Notably, Raymond has a number of prominent institutions as stakeholders.
MF/FII INVESTORS IN RAYMOND
| Investor | % holding |
| Tata Mutual Fund | 1.20% |
| Nippon Life India | 1.63% |
| Al Mehwar Comm Invest | 1.10% |
| Nomura Singapore | 1.16% |
| Abu Dhabi Invest Authority | 1.46% |
| Vespera Fund | 1.96% |
| Source: BSE |
Interestingly, the Raymond board scores on gender diversity. Besides, Nawaz Modi Singhania, it also has Mukeeta Jhaveri, a retired investment banker, on its board. Mukeeta’s profile is particularly notable in this context (see below), and how she reacts to the recent developments will be keenly watched.
MUKEETA JHAVERI, INDEPENDENT DIRECTOR, RAYMOND
A retired career investment banker by training and an alumnus of NYU Business School, Mukeeta currently mentors start-ups in femtech and fintech while consulting in contemporary Indian art, philanthropy and CSR in the cultural space.
As Vice Chairman of St. Judes India ChildCare, a respected pan India NGO that provides a home away from home for children with cancer, her focus is on scaling up and new projects. She is currently overseeing a project to house 222 families undergoing treatment at Tata Memorial Hospital in their Actrec campus in Kharghar.
She also serves on the Board of UTI Mutual Fund Trustee Company as a Trustee.
An avid collector of contemporary art, antiquities and miniature paintings for 40 years she has been a member of the International Directors Council of the Guggenheim Museum New York since 2016.
Source: Raymond's website
Even as we wait for developments to unfold on the governance front at Raymond, the watchdog of governance for listed companies, SEBI, is also likely to keep a close track of how things progress. Clearly, this instance will be a test of how governance standards in the country have truly evolved.
BEHAVIOUR STANDARDS AT INDIA INC
Should a man beat a woman, a child, a dog, a cat, anyone? Will India Inc stand for it? That is the bigger moral question. With leadership comes responsibility. To live up to it, you must be a Complete Man.
