Updated on: Friday, October 22, 2021, 12:02 AM IST

Grow with Governance: Tackle conformity bias with cognitive diversity, says Sutapa Banerjee

Sutapa Banerjee |

Sutapa Banerjee |


At the peak of her career, Sutapa Banerjee decided not to continue climbing the corporate ladder but to pursue new opportunities. She realised her calling is more than what she had imagined. Today, she serves as an Independent Director on Boards of Zomato Limited, Godrej Properties, Polycab Industries, JSW Cement, Axis Capital, Manappuram Finance, Camlin Fine Sciences and Niyogin Fintech. In addition, she works as a Decision Coach for senior leadership talent.

Over three decades of professional experience, she has been associated with large multinational banks — ANZ Grindlays and ABN AMRO — and an Indian Investment bank, Ambit. Banerjee, a Harvard Fellow, talks about the role of cognitive diversity (at the Board level) with Free Press Journal’s Jescilia K and MentorMyBoard’s Bharathi Iyer in the latest edition of Grow with Governance.

Edited Excerpts:

Tell us about your journey

I was a straight-jacketed banker for the first 24 years of my professional journey. At the peak of my career, I wanted to do something different. Being a banker, I did not know what I want to do. At that time, I got an opportunity to apply for a fellowship at Harvard.

Post that, I joined Oxfam and that was my very first board journey. It continues to be one of the interesting Boards that I have been on. This was followed by a conglomerate inviting me on its Board.

I did not enter this profession thinking that I will make a second professional career as a Board Director, even though I sit on around nine Boards today. I went to become a board member with a lot of curiosity as well as to put to use my experience.

The journey was exciting because most of the opportunity was from non-financial services. This allowed me to learn about sectors and industries, and share my learnings.

‘Good Decisions can lead to Bad Outcomes; Bad Decisions can lead to Good Outcomes; Hence....?’ -- can you explain this thought that you follow?

This statement is based on behavioural insights that come from behavioural economics which is the intersection of psychology and economics.

This intersection helps us understand that humans do not make decisions rationally as we are affected by external and internal influences. Behavioural insight is about what can make your judgment impaired.

This line means I am separating outcomes from decisions. For instance, there is a general tendency to believe that when an outcome was good, the decision was right and vice versa. But behavioural insight suggests even when the decision is right, one needs to revisit the whole process and understand what went right.

One must examine the decision process. So that one will understand where the decision making and good skills stand in this process.

To appoint a board member, it is usually fit and proper criteria that regulators follow. Your view there.

When the regulator talks about fit and proper criteria, it is more traditional. When I say fit, I mean having similarities and interests as the other Board Members or the promoters of the company. So, this like-minded approach tends to make you blindsided. In that case, despite having documentary evidence, there are chances Board Members end up becoming victims of conformity bias.

Cognitive diversity means the ability to think differently and that is one way to destroy cognitive biases. Thus, it is necessary to have Board Members that bring diversity to the board.

How did you contribute to boards of non-financial services?

At the end of the day — even if the industry is different — the processes, systems, controls, and checks and balances exist. And this needed to be followed whatever be the case. So, along with processes, strategising was another area of contribution.

How to encourage good governance?

To bring in good governance, you need to bring in fresh blood. This is because the same executive or a board member will continue to look at the same set of problems the same way. Unless someone new does not join in and show a different direction, there are chances you may not think differently.

ESG is gaining importance today. How can the board encourage managers and institutions to achieve ESG targets?

The driver of ESG for a company is based on pulls and pressures faced by the company — consumer activism, proxy advisors, investors, government — as it nudges the company in a certain direction.

In addition, investor pressure is quite significant today. It will continue to grow. Thus, it will be in the interest of the company to be ESG ready. This will allow companies to attract long-term funding from long-term investors. Thus, companies must follow ESG.

The board plays a critical role in ESG. It is because if ESG reaches the board level, there are more chances for it to become successful as it gets the attention of top management — as they are answerable to the Board.


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Published on: Friday, October 22, 2021, 12:02 AM IST