The Hindu Business Line : It’s efficiency, not ownership that matters

Kolkata, July 16 Privately managed or professionally managed companies – which are better at managing the ebb and flow of economic tides – was the subject over which two stalwarts, Mr H.M. Bangur of the Bangur Group and Mr R. (Gopal) Gopalakrishnan of Tata Sons, debated for nearly two hours and the consensus was that it was not the ownership but efficiency which mattered most.

There are any number of efficiently-run family businesses just as any number of failed professionally run companies, it was observed. The debate was organised by Millennium Mams, a ladies’ organsiation.

Mr Bangur spoke on behalf of the family-run business extolling its virtues such as quick decision-making, entrepreneurship, penchant for taking risks and relationship with employees at personal level.

Most best-run cos’ family-run

“In a family-run business mediocrity is often accepted because of life-long relationship,” he said. He also used the word “patience capital” to denote an entrepreneur’s ability to take the long-term risk. Most of the world’s best-run companies are family-run, he said and pointed out that as many as 350 of the Fortune 500 companies were family-run.

Mr Bangur, however, conceded that it was often difficult to draw a line between a family run business and professionally run company and cited the examples of Reliance and Infosys which were both family and professionally run.

On the other hand, the country’s biggest professionally run company was the Union Government where one could spend lifetime without performing anything, he observed.

Mr R. Gopalakrishnan

Mr Gopalakrishnan started by saying there was no company which was not professionally managed. “You do not produce enough children to run the entire company on your own,” he said, suggesting that the services of professional managers were really needed to run any company efficiently. Till 1990, the Tatas owned only two per cent in Tata Steel, rising now to 30-35 per cent. “Is Tata family run or professionally run,” he wondered.

Listed vs unlisted

He made a distinction between privately owned company whose shares are not listed and listed companies with majority stake held by a family. The privately owned companies with shares not listed were outside the scope of the debate. The key issue in his opinion was whether a company was well managed or badly managed. He also commented sharply on Mr Bangur’s observation that the ownership of a family managed company should automatically pass on to the younger members of the family. “This is immoral for company where the family is holding is 35 to 40 per cent because the larger chunk share is held outside the family,” he observed.

However, Mr Gopalakrishnan drew attention to what he felt was emerging as critical for our society. Increasing shareholders’ value could no longer be the be-all-and-end-all any business, as far more important was how to handle various turbulences afflicting the society which was gradually entering into an era of humanism from an era of technology.

“Creating wealth is no longer the critical issue as far more important issue is sharing the wealth with the community as terrorism and militancy loom large in the horizon,” he said.

“Reading balance sheet is nothing compared to reading the emotions of the people.”

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