When a leader comes under inexplicable influence of someone

19th October 2018 BUSINESS STANDARD In my 3rd August column, I explored the challenge faced by independent directors when an iconic leader in the company is accused of an ethical misdemeanor.

14th October 2018 BUSINESS STANDARD

R. Gopalakrishnan*

*The writer is a corporate advisor and Distinguished Professor of IIT Kharagpur. His new book, “CRASH: lessons from the rise and exit of business leaders” will be published by Penguin India in November 2018.

Email: rgopal@themindworks.me

In my 3rd August column, I explored the challenge faced by independent directors when an iconic leader in the company is accused of an ethical misdemeanor. In this column, I will explore another dilemma: how do you recognize when a powerful leader comes under the manipulative influence of another person? The situation could be really tricky.

Two cases that are in the courts appear below. Facts have been assembled from published reports because I have no personal knowledge of them. The cases happen to illustrate my point about the directors’ dilemma.

First example: Some years ago, a controversy broke about Ms Priyamvada Birla’s estate and her chartered accountant confidante, Rajendra Singh Lodha (A contested will, Ishita Ayan Dutt, Business Standard, 26th Nov 2014). Lodha had served as a non-executive director of Birla Corporation. Lodha was very close to the Ms Priyamvada Birla and Mr MP Birla, who were childless. He referred to her as Badi Ma. After the death of Mr MP Birla, Ms Priyamvada became chairman. At her initiative, the board appointed Lodha as co-chairman of Birla Corporation. She left her estate of Rs 5,000 crores to be handled by Lodha, an outsider to the Birla family. It was believed by the Birla family that Lodha exercised a not-so-benign influence on Ms Birla after the death of her husband. Commentators and observers wondered what the board directors were doing when the company management was handed over to Lodha.

Second example: The Singh brothers, Malvinder and Shivinder, are reported to have squandered USD 2 billion of company wealth, partly through bad loans. (The billionaires and the guru, Ari Altstedter, Bloomberg, 16th August, 2018). A godman cum business tycoon, Baba Gurinder Singh Dhillon, is reported to have a deep influence and involvement in the financial affairs of the brothers. He is also related to one of the Singh brothers. What were the independent directors doing while loans from the listed companies were being given without proper due diligence?

Timing is important. If directors intervene too early, they can be accused of interfering with the personal affairs of the leader without evidence, which is strong enough to be tested in court. If they do not intervene at all, then independent directors can be criticized for sleeping at the wheel. In both these cases, it would appear that an important leader was being manipulated. As the malevolent influence on a leader develops, the facts are often not clear to independent directors and they hesitate to discuss, let alone to do something.

France was shaken by an allegation about L’Oréal heiress, Liliane Bettencourt. Her daughter argued that her mother was no more fit to manage the family fortune, having come under the influence of a gay society photographer, Francois-Marie Banier. In America, there is the CBS-Viacom drama, in which Chairman Sumner Redstone is being accused of being manipulated by a former companion. TISCO chairman Russi Mody was thought to be under the undue influence of a younger colleague.

Unexpected things happen when a leader is manipulated; people around the leader feel uneasy but find it difficult to understand the facts and how to address the problem. How can company independent directors think about the issue if they don’t read signals that a powerful leader may be under the negative influence of some person!

History provides hindsight, which might help to formulate today’s foresight. More on lessons from history and mythology in future columns. Considering historical narratives, the early signals are likely to be:

  1. The powerful leader faces a huge personal chasm or void in his or her life.
  2. A ‘simple, humble, and sometimes occult’ person enters to fill that void.
  3. That person gains immense credibility and gravitas through visible, special treatment by the powerful person. Nobody around can fathom why.
  4. The ‘simple’ person deploys his or her surrogate power to the great consternation and annoyance of the others in the institution.
  5. When the powerful leader dies or is removed, the ‘simple’ person is dealt with and often consigned to history.

When an independent director perceives that a powerful leader of the board is being manipulated by another person, the director can cross-check with these symptoms. Directors need to be alert about behavioral changes in a powerful leader, a situation, which could require quiet intervention and sagacity.