India Inc’s succession plan is seeing a gender shift, albeit slowly

Business Standard | September 28, 2020 

Legacy planning firm Terentia is helping a north India-based mid-sized manufacturing company form a policy to induct women family members — including daughters-in-law — into business. 

India Inc’s succession planning is seeing a gender shift, albeit slowly but with many caveats.

Chennai-based Murugappa Group, for instance, voted against giving Valli Arunachalam a seat at its holding company’s board. The eldest daughter of former executive chairman M V Murugappan, in an interview with Business Standard, later pointed out there has been no woman from the family on the board for 119 years. 

Women leaders, succession planners and lawyers say doors in family businesses are opening but a stronger push is needed.

“Less than five per cent of families are open to giving a leadership role to a woman family member,” said Sandeep Nerlekar, founder and managing director at Terentia Consultants, which helps family businesses plan succession.

Others point out that there is a shift, but not on a par. “In recent times, there has been a visible shift in perspective, with women taking on leadership positions and managing business in an extremely professional and focused manner,” said Kanika Premnarayen, Partnerat Indian Law Partners.

“The magnitude of change (in gender inclusion) is not on a par with the talk around gender diversity and affirmative action, and the change needs to be more than cosmetic,” she added.

Multiple Indian conglomerates may see handover of responsibilities to the next generation in the coming decade. Mukesh Ambani-promoted Reliance Industries (RIL) has already inducted third generation of the Ambani family into business, which includes daughter Isha, who is actively involved in RIL’s retail business.

The Godrej family is another gender-positive example with Nisaba Godrej leading Godrej Consumers Products as chairperson and managing director.

Rajesh Narain Gupta, managing partner, SNG Partners, points out education and disintegration of the joint family system has helped narrow the gender divide. He said, “Control vesting only with the eldest male has mellowed down completely at least in tier-1 cities.”

These changes, however, ride on many caveats. N S Nappinai, advocate at the Supreme Court, for instance, said, “In general, be it large industrialist families or small and medium size enterprises (SME)s, there is a gender bend in succession planning. It may not always be obvious leaving out of women from succession plans.” The gender bend, she adds, in many cases translates into “women being allocated weak or salutary businesses and not part of the main stream of meaty business ventures.”

Wives of certain group chairman, for instance, are only involved in corporate social responsibility (CSR) activities even though they may be directors on the boards of holding companies. Nerlekar from Terentia agrees “Women may not be active at the core business level, but may have a participatory role in tertiary levels like NGO/CSR or training and development.”

Families, without a male heir, however, are more willing to accept female leadership. “It t is still rare for daughters to be preferred for leadership in the presence of a son,” says Nerlekar. Research consultancy KANTAR, in fact, in a study earlier this year, found that less than four out of 10 Indians feel ‘very comfortable’ about a woman heading their government or a major company.

Meher Pudumjee, chairperson for Thermax, agrees most women enter family businesses only by default. Pudumjee took over from her mother Anu Aga.

“Women very often join family business by default. It was my maternal grandfather who started this business – he had a daughter (Aga) and two sons. My mother was never ever given the slightest inkling that she can join the family business.”

Aga became the chairperson of the company after Pudumjee’s father passed away. “The change may take a few more generations. Also, it is not just men, but also women who perpetuate these wrong messages to the next generation. Just because he is a male heir, he even gets to be CEO. Whether he is capable or not doesn’t matter,” said Pudumjee.

“The common reason for not including daughters in the business succession plan is to keep the stake of businesses in the family or not involve the in-laws in the business or decision making,” said Nerlekar.

Some are overcoming this through formation of trusts, which offers wealth sharing, but women will still miss out on leading the company. “Some families have a tendency to discourage daughters from participating in the family business, post marriage. In these cases, the provision for the daughter is made under trust or otherwise. There is a thought process on maintaining / providing and sharing wealth with a daughter with focus on what happens if she is not married / or if married but divorced or separated,” said Gupta from SNG Partners.

While a significant change in family attitudes await, recent judgments around the Hindu Undivided family (HUF) have been encouraging. Gupta, however, has a word of caution. “The judgments around HUF may lead to more litigation on old cases and old HUF as currently there is no focus or less focus on HUF. In fact, the tendency is to dissolve as soon as possible all the existing HUF.”