Manu Seth goes home

The departure of a corporate chief ahead of the completion of his five-year term should not normally excite this newspaper to the point of...

The departure of a corporate chief ahead of the completion of his five-year term should not normally excite this newspaper to the point of delivering an editorial. Except that Manu Seth, son of the late Darbari Seth, stepping down as managing director of Tata Chemicals marks a first of sorts in the Indian corporate world: the acknowledgement of top management8217;s responsibility to shareholders. Tata Chemicals showed a first-time loss of Rs 3.76 crore in the quarter ended June 30. In the corresponding period last year, the company had still been in the black with a net profit of Rs 6.56 crore, though this disguises a long-term loss of profitability due to severe import competition.

The inside story of Seth8217;s departure has yet to become public, though Tata group chairman Ratan Tata did tell a newspaper a couple of days ago that Tata group CEOs must fall in line and meet expectations, or else. Seth, under pressure to deliver, has quit and his resignation has been accepted with almost embarrassing alacrity.

The fortunes of Tata Chemicals and Manu Seth aside, the larger significance of this departure is extremely positive. Those at the top in an organisation are disproportionately privileged people. If this obvious remark needs support, much can be found in the million-pound pay packages of top British executives which have caused acute public resentment in recent years.

British telecoms firm Vodafone recently went overboard to the extent of financially rewarding its top man for effecting merger with German firm Mannesmann, without waiting to find out whether the merger delivers profits for the shareholders. Up until then the only thing to have happened was a fall in the Vodafone share after the merger. Without going into the rights and wrongs of such over-generous attitudes to their top people, the necessary concomitant of such rewards has to be total accountability to shareholders and the acknowledgement that managers exist to deliver profits for them. If they can8217;t, whatever their reasons, they have to be answerable.

Take the stock market high-risk, high-return analogy. Investors expect higher returns from the stock markets because investing in them is a riskier proposition than, say, letting their money idle in a bank account at low interest. The well nigh outrageous compensation paid to top managers is a similar thing. They are seen as people of exceptional talent whom it is worth a company8217;s while to pay so much to keep. Obviously the expectation is that they will be value for this money. They should be vulnerable to severe action if they prove not to be. The principle of accountability is generally weak in Indian society.

The privileged are so strongly entrenched that they are almost always able to work the system to their advantage, whether it is the Jain hawala case, the Uphaar cinema deaths or the 1984 riots. At best, expect the smallest pawn in the game, the lowliest chapraasi, to be sacrificed. There may or may not be more to Manu Seth8217;s departure from Tata Chemicals than meets the eye. But that does not change the fact that the top man has for once had to go for poor performance on his watch. The idea should spread quickly, in the corporate world and beyond.