Hoshang Sethna, Company Secretary, Tata Motors Limited introduced several best practices in the company much before they were mandated by law in India. Speaking to Dipta Joshi, he elaborates on the need of the hour given the changing regulatory landscape
If Hoshang Sethna, Company Secretary, Tata Motors Limited, were to write his memoirs, it would definitely make an interesting read. Hoshang joined the company when it had just one subsidiary and a turnover of Rs 8000 crore. Today, the company has 75 subsidiaries and a consolidated turnover of Rs.270,000 crore.
Of the three decades in the Secretarial field, Hoshang has spent 23 years with different entities within the Tata Group itself. He was associated with Tata Elxsi and Tata Oil Mills Company (TOMCO) before joining the Tata Engineering and Locomotive Company (TELCO) which was later rechristened as Tata Motors Limited. It’s no surprise then, that Hoshang has been privy to many trend setting events in the Group’s celebrated history. He was part of the historic Jaguar Land Rover acquisition which remains one of the most successful foreign acquisitions by an Indian company in respect of merger control regulations and financing.
Recalling his association as TOMCO’s Company Secretary (CS), Hoshang reveals, he had no time for preliminaries like settling down in the new job etc. The company’s decision to merge with Hindustan Unilever Limited (HUL) was being contested by some of TOMCO’s shareholders and he found himself in the thick of action, handling the merger case. “The case was challenged in the Supreme Court too and turned out to be an unprecedented one, because it set standards in valuation of companies (during mergers) which are followed even today,” says he.
Hoshang had already built his expertise in dealing with public and rights issues, property besides certain corporate legal matters before joining the Tata Group. But his experience with Tata Motors helped hone his secretarial skills like never before when the company spread its presence across Asia, Europe, Africa, South America and was listed on the New York Stock Exchange. Hoshang was part of the core team that handled the listing of Tata Motors on the New York Stock Exchange and its registration with the US Securities and Exchange Commission (SEC). He gained an in-depth knowledge of the Sarbanes-Oxley Act and the COSO framework for internal controls – both of which protect shareholders from accounting errors and fraudulent practices through internal control and fraud deterrence in an enterprise. He also developed a working knowledge of the US GAAP (Generally Accepted Accounting Principles), and the IFRS (International Financial Reporting Standards). He was also involved in the launch of various pioneering financial equity related fund raising instruments in the Indian and international markets like the issuance of the Global Depository Receipts (GDRs) with warrants attached, American Depository Receipts (ADRs), Foreign Currency Convertible Bonds (FCCBs), Yankee Bonds and the recent, first rights offering by an Indian company registered on the U.S. Stock Exchange.
Having gained a grip on international governance practices, Hoshang was encouraged to review the same and build in best practices suitable for the Tata Motors Group. “We introduced several best practices such as the whistle blower policy, auditors’ independence policy, a fully independent audit committee besides internal controls over financial reporting. All this, much before they were mandated in India,” says he.
However, there have been several challenges. “The change in the organisation, from being just a commercial vehicle Indian manufacturer to a complete automobile company having a global footprint needed a change in culture and mindset (from a supply driven organisation to a demand driven one),”says Hoshang. Thanking his seniors for all their encouragement, he adds, “The Tata organisation and culture grows on you and the journey continues to be an interesting one.”
Hoshang believes a Company Secretary has ample opportunity to improve and change the way an organisation behaves since he takes part in the Board meetings and is a witness to the visionary thoughts-in-action during discussions on strategy, financial results, budgets, oversight of subsidiaries etc. Besides by ensuring that the directions given by the Board are adhered to, a CS plays an important part in the democratic setup where the Board’s decisions are meant to be the last word in corporate decision making, except of course in cases where shareholders’ approvals are required. His own approach towards shareholder activism has always been proactive. In fact says he, “Dealing with shareholder activism has been refreshing with many lessons learnt and practiced. Listening to investors often results in value addition to the business and improved governance practices.”
According to Hoshang, having an open mindset towards change is the need of the hour given the changing regulatory landscape and the competitive blood-wars. “Changing continuously will be the only constant in the coming years,” he adds. If the last two years are any indication, the next five years would be very challenging and exciting for a CS. As India progresses into its next emerging phase, any and every relevant change should be expected and warmly welcomed, says he.
Like most CS, Hoshang too feels the Companies Act, 2013, has been a mixed bag. While it has brought in various governance related changes which were imminent and therefore welcome, there are just as many avoidable changes. “They require laborious and frantic activity and don’t offer corresponding benefits to either the company or its stakeholders. The Bill when enacted was very challenging and caused disruption and challenges in business. Compliance with Company law on the whole has become expensive.”
Hoshang believes the CS community needs to look forward to various simplified and business-friendly initiatives being launched by the current government.
Some of the issues included in his list of grievances include tax benefits on CSR expenditure (over the mandated 2 percent), managerial remunerations and filing of Board resolutions with the Registrar of Companies (ROC).
Hoshang also has reservations regarding too much disclosure (particularly by unlisted and private companies), which is why he has been proposing exclusion of debt listed companies from the definition of listed company.
“The risks are different for equity and debt investors. Equity investors might require more information but debt companies are closely-held entities. By asking equity and debt listed companies to provide the same amount of information, lenders are being given access to lot of unnecessary information,” says he.
Having dealt with various corporate laws in different jurisdictions, there is a lot that can be done to simplify the Companies Act, 2013, adds Hoshang. And yet, there is no doubt, the Act has provided ample opportunities to Company Secretaries, both in the field of profession and practice. “We need to live up to the expectations and the responsibilities carved out for us and take our rightful place in senior leadership,” says he.
With technology playing an important role going forward, Hoshang advices new Secretarial aspirants to be updated on technological advances and breakthroughs as also with the changing regulatory environment on an online basis. He concludes saying, “One needs to have strong functional fundamentals, be an expert in Company law and other corporate legislations. With this, the CS could be THE catalyst for change.”