While Gautam Singhania has been unable to mend the relationship with his father so far, his decision to exit chairmanship of Raymond is a lesson for family-run firms
Gautam Hari Singhania, promoter and chairman, Raymond Group, who is currently engaged in a legal tussle with his father Vijaypat Singhania over ownership issues, has announced that he will step down as chairman from all group companies. Moreover, Gautam will not involve himself in day-to-day operations.
Instead, Gautam intends to invest his time and energy in making the group strong enough to run without a promoter. He wants to focus on strategy, budgeting, target setting, new product development, compensation and PR.
Singhania has moved out of the leadership role for the FMCG business along with Raymond Apparel. Rajeev Bakshi is currently the chairman of JK Helene Curtis and Nirvik Singh replaced Gautam as chairman of Raymond Apparel in November 2018. Gautam is now on the lookout for a professional to lead the engineering companies JK Files and Ring Plus Aqua.
In Singhania’s views, promoters should step down from executive positions early to prevent problems. He swears that he will create independent governance in each group entity and ensure that the promoter family is not involved.
Taking the example of Raymond Group, Singhania elaborates, “Tomorrow morning if I die, god forbid, there are identified people who will take charge of everything. Raymond can run independently and competitively. My children are very young. I have a responsibility to my wife and children, to my employees and shareholders, my banks, institutions and customers.”
On the issue of the feud with his father, Gautam counters that Vijaypat has ‘hundreds of crores’ and he actually wants his father to stay with him. In fact, Gautam claims that he has made this offer to his father several times.
Vijaypat claims that he gave his son 37% stake in the group in 2015 as a gesture of love, and has been suffering since. Vijaypat was removed from the chairman emeritus post and also not given an apartment in the JK House in Malabar Hill, South Mumbai as was discussed. According to reports, Gautam had advised the Board at Raymond against permitting the sale.
While things haven’t gone well with his father, Gautam says he is committed to ensuring that the same doesn’t happen with the next generation. He wants to make Raymond a model company on the lines of international family-run businesses like BMW, where there is a strong demarcation between ownership and management.
Gautam’s decision to exit ownership and involvement in day-to-day functioning is a welcome announcement that needs to be emulated by family-run businesses across the board. Bringing professionals in executive positions on the basis of merit is always better from the perspective of shareholder value, and is therefore in the best interests of the family and the business. Family members should be given executive positions strictly on the basis of merit and capability.
From Gautam’s perspective, it is very important to clearly demarcate your commitments to the business and the family, “It is my job to protect my family on one side and my business on the other, and the two paths don’t have to cross. My role to my family is to make them financially secure. My role in my businesses – they must run most competently and independently. Two separate objectives. If this runs well, other does well. But then it need not be interlinked.”