Opinion: Family Tussles and Value Destruction for Company Shareholders
MP Shorawala

The Indian corporate history has been replete with the instances of how the internal tussles/power struggles amongst the family members of a company leads to value destruction for the shareholders in the process.

In a country where a majority of businesses are family run, incidents such as Singh vs Singh, Singahnia vs Singhania and several such cases have a potential negative impact on amongst a wide spectrum of stakeholders.

Sample these! The relationship between the Singh brothers, erstwhile promoters of Fortis Healthcare and Ranbaxy, went sour after allegations of fund diversion from the healthcare chain emerged. After a brief truce brokered by their mother, the brothers are once again locked in pitched battles with accusations of assault raised by both camps.

Resolution in the protracted feud between father-son over the Raymond Group still looks like a far cry with the elder Singhania looking to knock on the court doors for a resolution.

The Singal family, which owns the New Delhi-based Bhushan group, is on the verge of a split following a family dispute.

Onkar S Kanwar is no stranger to controversy. In the early 1990s, he had an open spat with his father, Raunaq Singh, over who should control Apollo Tyres. He won finally, but not before a lot of dirty linen had been washed in public. In 2013, his brother, Narinder Jeet Kanwar, moved the Company Law Board in Chennai charging Kanwar of mismanaging the company.

Once Nanda Sr. passed away in 2000, Anil Nanda appeared to have lost interest in staying united with the family. He chose to walk away with automotive component maker Goetze India, in which he bought Escorts holding. In 2003, when Rajan Nanda wanted to sell a chunk of Escorts Heart and Research Institute, Anil waged a public battle against his brother until the move was scuttled. Today, Anil is sitting pretty. Goetze, in which he owns close to 30 per cent equity, is financially sound, leaving enough for him to indulge his finer tastes - such as embroidered jeans.

In the present case of Omaxe, where the younger brother has questioned certain steps by the management alleging mismanagement after he was not reappointed on the board. Whether his allegations holds true in the long run is a different story but as of now it’s the general shareholders who are on the losing side. It is important to address this issue in the backdrop when questions get raised to settle personal scores rather than for the larger public interest. As, it will be interesting to know, if the same set of people had ever got their dissent noted, during their tenure at these institutions or they have been raised once they are out.

Not only the feud impacts the shareholders outside, especially the minority ones but quasi whistle- blowing like casting aspersions on the company, other promoters etc. and corporate governance in the company, impacts everyone quite negatively. In the short to the longer term the feud may get resolved but no one get to undo the damage done to the stock price, the shareholders, especially the minority ones and also many who have invested via mutual funds. It’s time to look through the interests of these people and protect the shareholders along with every stakeholder!!!

 (Writer is ex-director Central Bank of India; advocate on-record-Supreme Court of India)