Governance issue comes to the fore

HOW THE OUTSIDE WORLD LOOKS AT IT

A tax expert felt board has been a mere onlooker and the family has dictated terms.

Corporate governance became a key focus of discussions among lawyers and tax consultants following the Reliance announcement of a settlement between the Ambani brothers. A section of experts came down heavily on the Reliance group for overlooking the corporate governance issue.

"This is a mockery of corporate governance as the board has been a mere onlooker and the family has dictated terms," said Kanu Doshi, a legal and tax expert.

Doshi said the entire episode, from the falling out among the brothers in November 2004 to the settlement today, showed a total absence of corporate governance. "Only personal gains were considered before reaching the settlement, which is against the spirit of corporate governance," Doshi added.

However, a senior lawyer with Crawford Byley & Co did not find any lapse by the company. "The issue of ownership control of the Reliance group was within the Ambani family. If the outcome of the settlement impacts the interests of minority shareholders, there is a violation of corporate governance norms. Otherwise, there is no violation of corporate governance," he explained.

"It is too early to come to any conclusion. We need to see the structure of the settlement and what kind of cash outgo is involved," said a senior partner of a legal firm.

Vaibhav Manek, partner KNAV Advisory, said, "Corporate governance could have been handled in a much better manner like holding joint press conferences instead of having selective leaks, leading to speculation." He, however, added that it was commendable that a complex organisation like the Reliance group managed to resolve issues of ownership within such a short time.

Tax Consultant HP Ranina said dividing the assets of a group with $23 billion in revenue would be a minefield of taxation and valuation issues.

According to him, the board should have followed the corporate governance norms and not followed the promoters' wishes only. He was particularly critical of the board's failure to come up with details of the settlement scheme.