COMPANY SPECIAL ....................The TCS board is all about principles and performance

The TCS board is all about principles and performance

The house of Tatas has always been known for its integrity and Cyrus Mistry the new Chairman of Tata Sons and TCS, is upping the bar a notch higher. In a board meeting, Mistry decided the crown jewel of the 

Tata Group will not do any business with Shapoorji Pallonji, his father's real estate company, because it was a related party transaction. That decision has business implications for the firm he once ran but the sixth chairman of Tata Sons decided to uphold the Tata values rather than indulge in a practice that is legal but of questionable ethics. Even the protests from the TCSBSE 1.82 % management, who wanted to work with Shapoorji Pallonji because of the company's expanding campus requirements, didn't deter Mistry. "The Tatas believe in doing business ethically and the chairman walks the talk," says Aman Mehta, an independent director on TCS board.

That Mistry continues to choose principles over profits and stick to the core Tata values is one of the reasons the TCS board is one of India Inc's most admired. Not that profts and performance are an issue; in 2014 India's largest software company clocked revenues of $13.4 bn with net income of $3.1 bn.

Apart from the performance, one just needs to take look at the TCS board composition to understand why peers respect it. The set of high profile independent directors like public policy expert Dr Vijay Kelkar, ex-HSBC banker Aman Mehta, ex-SBI chairman OP Bhatt, and ex-CEO of GlaxoSmithKline, India VenkatramanThyagarajan bring in diverse experience coming from different backgrounds; the nonindependent non-executive Tata representatives like Cyrus Mistry, S Ramadorai and Ishat Hussain, and Phiroz Vandrevala have run large companies or have deep industry expertise, and for the global perspective, there's Ron Summers and Harvard innovation guru Clayton Christianson. "We have a set of exemplary members on our boards who bring lateral perspective and deep knowledge. We have people who know the banking industry, people who know India, people who know Europe, people who are thought leaders in innovation, says CEO N Chandrasekaran. 

Though a carefully composed board makes a whole lot of difference but for a board to function well, a culture of openness, transparency and candour is a must-have. 

The Tatas own more than 75% of TCS and four non- executive non- independent directors represent the group on the board. With that kind of heft, board independence can be a casualty but that's not the case with TCS. "Earlier Ratan Tata and now Cyrus Mistry want directors of independent mind. The Group has a history and legacy of trusteeship and good governance and that continues. " 

says Venkatraman Thygarajan.

 "The good part is that the Tata Group representatives behave like other directors. Even the chairman is not just focused on dividends and market value and is often looking to take the best practices from TCS," adds Mehta.

Competing with the likes of Infosys, Wipro and global majors like IBM and Accenture, TCS has been on a roll over last five years, growing faster than its peers. How does the TCS management team engage with the board on matters of strategy and execution? "We give presentations during four quarterly board meetings. In one board meeting we discuss the strategy over the next three years, in areas where we are investing, areas we are entering, and trends. 

The day is spent debating the quality of the strategy. In other board meetings, apart from the governance items we always give visibility to the specific areas of the business and the leaders of the business." says Chandrasekaran. TCS also takes the entire board to its North America offsite where they meet customers and management team in a casual way. 

The business unit heads, geography leaders, and domain heads present to the board regularly giving the members a good visibility of second or third rung leaders. The practice helps the members get a deeper understanding of business and also get a closer look at the leadership pipeline.

Having a thought leader like innovation guru Christianson on the board is an competitive advantage, especially if you operate in an industry like technology wherein disruption can take the game away quickly. "Clay brings in enormous amount of insights because he can draw parallels of what we do to many different industries. 

He shares with us how different scenarios will play out or have played out in the past. He talks about how we are disrupting and how we might get disrupted," says Chandrasekaran. When the going is good, what exactly does the board do apart from the reviews? "They ensure that performance is never an issue," laughs Chandra. 

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