Everonn Issue Once Again Underlines Board Insensitivity To Governance Issues
September 17, 2011
It is only ironic that just two days after Anna Hazare claimed victory by forcing the parliament to redo the JanLokpal Bill(Anticorruption bill), that a corporate honcho was arrested by CBI for allegedly bribing an income-tax official, who had detected undisclosed income to the tune of Rs. 116 crores, presumably for helping the company for reducing the taxable amount by Rs.60 crores from Rs.116 crores. Everonn Education had Mr.J.J.Irani, a redoubtable personality with very long association with the Tata group and immaculate reputation and who also headed a former government committee to incorporate stringent norms for corporate governance , as independent , non-executive chairman. Following the incident, Mr.Irani resigned from the post of Chairman and director of the company and the board replaced the former MD and CEO , Mr.Kishore with Mrs.Susha John, a whole-time director. It is not clear whether the change happened before or after the resignation of Mr.Irani. And , the dust seems to have settled with the changes, eventhough the Everonn scrip was beaten down in the market by about 50% in about four days. The apparent feeling among corporate circles is that the board has exerted its powers and rights in the time of crisis for the company. But, does the action of the board really direct us to believe that all the values of corporate governance have been upheld? I don’t think so. It is because, the income Mr.Kishore wanted to hide was not his personal money as was reported and validated by the resignation of the Chairman Mr.Irani. Mr.Irani ,along with all the non-executive as well as independent directors , might have been under dark about the undisclosed income. But, if the income undisclosed pertained to the company, it is very difficult to believe that the other executive director, Mrs.Susha John, did not know about the matter. Also, it may be difficult to imagine that Mr.Kishore would have paid the bribe personally, from his income. Why should he do it? While Mr.Kishore was a director of all the 13 subsidiaries of Everonn(established between 6/11/07 and 24/2/11) according to the annual report for the year 2010-11, Mrs.Susha was a director of 12 of them. The board and the company would have decided to uphold the principles of good corporate governance, had they decided to change both the executive directors. Or, Mrs.Susha, should have offered to resign immediately after the whole episode became public. The investor and the public confidence would have increased , had the board acted more decisively.
In addition, the board should also have changed the auditor, M/S.P Chandrasekhar with immediate effect, who should have detected this kind of a failure of disclosure by the management.
