Most established companies in India may be family-run but the advantages of the same

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will turn detrimental in the long-term, say experts. Too much influence and dependence on a single individual investor or one group will eventually lead to deterioration.

“No matter who runs a company, the management should make sure that there is no significant influence by one or two persons alone,” said N Lakshmi Narayanan, vice chairman and board member of Cognizant Technology Solutions.

“This policy is the most important aspect to good corporate governance,” he added. He addressed the students of Loyola Institute of Business Administration at the third national seminar on “Corporate Governance – The Way Forward,” on Saturday.

In the Cognizant context, the company restricts individual investor stake to five per cent and any discrepancy is considered a violation of corporate governance norms, Narayanan said. Cognizant adheres to the ‘five-per-cent rule’ even to other aspects such as restricting revenue contribution by a single customer, he added.

According to CK Ranganathan, chairman and managing director of CavinKare, the company learned from experience that diversifying customers to reduce sole dependence is indispensable to a company’s growth. “This practice of good governance directly has a positive impact on revenue and profits,” he told Financial Chronicle in a recent interview. “Even when there is a good relationship and steady flow of revenue from a loyal customer, a company could be doomed when the former runs into even minor trouble,” he added.

Good corporate governance is accountable to shareholders, employees and customers. Normally, these three interests are considered to be conflicting with each other, with the management expected to balance them out. “However, it need not be and should not be so. Decent accountable profits and decent accountable governance are not antithetical to each other,” said lawyer and human rights activist Teesta Setalvad.

SV Narasimhan, director (finance) of IOC, however, said, “Family-run businesses have vision and long-term perspective of growth. CEOs may work efficiently in the short-term, but at a later stage spirit is lost.”

(with inputs from

Niranjana Ramesh)