HCL has to be ready for the new world: Shiv Nadar
HCL Technologies is among the five fastest companies to cross $1 billion net profit, $5 billion revenue and $15 billion market capitalisation since incorporation. While smart business decisions and quick transition into newer areas have aided the company’s performance, Shiv Nadar, Founder & Chairman, believes that HCL’s strong corporate governance framework has been strategic lever for sustained growth. Recently, Nadar was conferred the ICSI Life Time Achievement Award for Excellence in Corporate Governance for the year 2013. Business Line met Nadar to talk about the pillars of corporate governance, future of HCL and his new ventures in education and healthcare. Edited Excerpts.
Where do you see HCL going forward in next 3-4 years especially HCL Infosystems, which is now moving into services?
I do think that HCL has to be ready for the new world - which is what basically HCL is good at. We have to just keep addressing that. The very reason for our being is that we looked at the new world and new technologies. That has to be inherent in our being and we don’t have to get carried away by balance sheets and P&Ls. Keep that DNA going. If you corrupt it, you will pay for it. It’s very harsh thing to say but that is true.
Will your education and healthcare ventures be as big as HCL Tech?
Healthcare would be bigger and education would be roughly similar size. And both will be built on the technologies ahead. Whenever we are on the transformation phase of technology, that’s where HCL will do very well. They are at transformative stages.
A recent report says that IT is the easiest sector to fudge accounts given its largely services led nature. Would you agree?
In large companies, the CEO is very distant from operations. Ours has got close to hundred thousand people and we have a ‘Whistle Blower’ policy which is quite independently run. There is nothing called secret in this industry. Somebody in other company will know, some analyst will know. It will be known. It is only a matter of time. So in this industry, to get away is very tough.
Recently, the Supreme Court allowed CAG to look into the books of private companies. Your views.
I don’t know the facts on this matter but I have some questions. We are subject to audit, which is fair. You can say that your internal audit need to be in this standard or your statutory audit of this standard. We don’t mind this whole thing being replaced by somebody but our job is not to sit and audit all the time, we have a business to run. And also there are sensitivities about our executives being witchhunted by some external organisation. Can we have a foreign employee being questioned by CAG? We cannot expose them to that.
Can over emphasis on performance come in the way of doing ethical business? There is a lot of pressure on executives to deliver numbers which can lead to unethical means.
It can be. The executive’s bonuses are so large, and they play on very thin ice and the ice gets thinner and thinner and thinner…and suddenly when they go to such excessive quantum, the ice cracks, which is what happened in the case of Satyam.
What is that one thing that you are really proud of in HCL as far as corporate governance systems that are in place?
First is that it is in place. I am unconnected with that and that is the next biggest thing. It’s an executive privileged to take decisions because he stands accountable for it. An executive can be fired and at the same time he can be rewarded fairly. But for doing his job he does not require anyone’s sanctions. That’s one reason why HCL has grown quite well particularly in the last 15 years.
How did you ensure that HCL had good corporate governance structure in place?
We had some very capable people to manage the company initially. It was a small business but we ran it according to rules and norms. Two, I watched it being done in HP. We had a ringside view. In the nineties, HP was easily the finest corporation in the world. We invited HP executives to participate in the management and in the board. HCL had this concept of corporate officers since inception in 1999. We had a remuneration committee. Now everyone is talking about nomination and remuneration committee. We had this from 1999.
Has there been any situation where you had to face a conflict while dealing with governance issues at the board level?
I face it very regularly actually. If you have excellent people then you have to give them the power. They can’t say Shiv Nadar is a great entrepreneur, he is proposing this, he must have thought through this. It’s his money largely. We have proposed things which I am careful enough to say whether I am in favour of it or not, because the moment I say I am in favour of it, I am proposing it. Then what am I telling them? I can be either the Chairman or Managing Director of the board and I can’t have these two jobs in conflict. So I have to say that the CEO has to propose it, the CFO can propose it. After this the rest of the board members will have their views and I cannot express my views because finally I am conducting the meeting. Good governance finally will prevail and ultimately good entrepreneurship should prevail.
Do you see a larger role for your group companies with Prime Minister Modi’s vision like Digital India or smarter cities?
I definitely think so. The government of India is consistently very advanced. When the world was hesitant on UNIX, we were the first to move in, the RBI said that all banks will implement on UNIX. It worked!
Do you see the overall sentiments improving under the new government?
I had recently met many business leaders in the world and they all said that they are coming to India. They are all very large companies, the $10 billion plus size. I asked them- are you not worried about the rate of growth? They said in Europe we do not have growth, in US it is hope, in Japan it is negative growth. Where else do they take their money and go? So they are going to come to India to invest.
There are rumours of HCL Tech being sold off. Is it true?
No, my daughter said that she is just going to keep the business. Her opinion matters in this case.