Remove the word ‘Promoter’ from corporate dictionary
At the University of Sydney, I had the privilege of serving as the President of the University of Sydney Union (USU). USU was a AUD 21 Million revenue grossing organisation at the time, in-charge of most of the retail and student experiences on campus.
As President, I was Chair of the Board of Directors primarily in-charge of governance of the organisation. The Board of Directors employed a CEO who was responsible for running of the organisation. I learnt about good corporate governance through this experience.
Although I started Langoor in Australia, we opened an office in India about a year in. I first heard the word promoter then. As Managing Director of Langoor at the time, the word promoter was used to describe me.
Later, in 2013, I moved on to be the Chairperson of the business and a fellow shareholder took over the CEO role. However very often procurement departments, banks, government officials, clients and other suppliers would often ask who the promoter of the business is. The reality is that there are many roles in our business to ensure quality governance – and that question, depending on the context can have different answers.
The word promoter is used interchangeably for founders, majority shareholders, CEO and the chairperson. The word assumes that one person (or family) is responsible for all the key roles in that business. This is completely to the detriment of good corporate governance. Good business governance requires a combination of a CEO, a Board and senior leadership which all serve their respective roles. These roles together drive quality growth, impact and achieve the outcomes that the organisation is trying to achieve.
While there are exceptions, Corporate India really needs to understand the difference between ownership and management. In a well-run business, the owner may not necessarily be the best manager and vice-versa. They may too – but the point is owners and managers should regularly reflect the role they are playing in the business. The title they carry should also help articulate the role they are playing in the organisation. That clarity allows the freedom as well as accountability necessary to run a business.
Instead, in a promoter-oriented mind set the ecosystem relies or cares about only one leader. The reality today is for good businesses you want a range of these roles to work together. If corporate governance has to genuinely improve in our country, not merely for government compliance, but to actually benefit a business we need to move away from using the word promoter and start recognising people for the respective roles they serve.
The article originally appeared in Economic Times here.