Dr. Naushad Forbes – Independent Director on Godrej’s Family Board

THE Godrej Group, the archetypal familyrun conglomerate whose more-than-acentury-old sprawling empire spans from soaps to locks, has set up a separate body to serve as counsel for growth and deftly handle the tricky issue of succession. The so-called family business board (FBB) with independent directors will also help the Rs 14,000-crore group — which introduced India’s first lock with lever technology in 1897 — address governance issues and protect shareholder rights, said Godrej executives close to the development.

Godrej, whose name is almost synonymous with locks and safes in India, is witnessing many faces from its fourth generation assuming active roles across the group. The group is currently chasing a number of foreign acquisitions in an attempt to consolidate its diverse businesses.

The FBB will be led by group chairman Adi Godrej and include his brother Nadir Godrej, cousin Jamshyd Godrej, brother-in-law Vijay Crishna and independent directors such as Keki Dadiseth, ex-Unilever honcho and current chairman of Sony India, Naushad Forbes, director of Forbes Marshall, and Pradip Shah of IndOcean Fund and a co-founder of ratings agency Crisil. The fourth generation of the family, which includes the children of Adi, Jamshyd, Nadir and Crishna who are past 18 years, will attend meetings as invitees.

Godrej Industries chief strategy officer Vivek Gambhir will serve as secretary and be responsible for executing the FBB’s decisions and suggestions. Adi Godrej had no comment on the development.

Experts and Godrej watchers hailed the move, saying a professional board with family members and outsiders would help the group embrace rational thinking and decision-making. Indeed, according to a McKinsey report, only 5% of family businesses create shareholder value beyond the third generation. And many family-run businesses, bereft of an efficient succession planning, have been mired in legal battles.

“Such boards typically bring in an element of outside participation into a family board,” says Richa Karpe, a director with Altamount Capital, which advises families on strategic asset allocation across multiple assets and in succession issues.

LOCKING FUTURE

CASE LOGIC

Through the family business board (FBB), Godrej Group hopes to adroitly handle the difficult issue of succession Group thinks the FBB may also help it tackle governance issues and protect shareholder rights

CORE TEAM

The FBB will consist of group chairman Adi Godrej, brother Nadir, cousin Jamshyd Godrej, brother-in-law Vijay Crishna, and independent directors Keki Dadiseth, Naushad Forbes and Pradip Shah All fourth-generation Godrej scions above 18 will attend FBB meetings as invitees.

News – Economic Times – 17 March, 2010