Where there's no will. . .

On Saturday, July 16, the shareholders of Bajaj Auto accepted Rajiv Bajaj, elder son of Rahul Bajaj, Chairman, Bajaj Auto, as the managing director of the company.

The board of directors had approved the promotion as early as April 1. According to Rajiv's father, he has earned this position, having steered the two-wheeler business as the clear number two player after Hero Honda.

And Rahul Bajaj says it was 15 years of 'seamless' grooming that has earned Rajiv his current moniker.

Rajiv joined Bajaj Auto in 1990 on completion of his Masters in systems engineering from the University of Warwick, United Kingdom. But his elevation to top slot in the company was not a given.

"Had he not been competent, I would have selected somebody else for the post," says Bajaj.

"I was clear that Bajaj Auto should have a very competent successor acceptable to shareholders."

His other son Sanjiv, who joined Bajaj Auto in 1997, is joint managing director and will report to Rajiv. Bajaj is clear that there can be only one boss, and discards the idea of two CEOs in the saddle. "There has to be just one driver," he asserts.

So far so good. But weren't things just as rosy for the Ambanis as long as Dhirubhai Ambani was alive? Agreed, both Mukesh and Anil shared the same title (vice chairman) and Anil did not report to Mukesh in the strictest sense of the term, but all that didn't last long.

With Dhirubhai dying intestate, things didn't look bleak initially --  it was Anil Ambani who proposed Mukesh's name as chairman at the first board meeting after Dhirubhai's death in July 2002.

Later, though, he had to depend on his mother to sort out the complications between the brothers. "The absence of a will was the root cause of the rift," says a former senior employee at Reliance, now with a rival company. "While control was clear, the ownership was left vague."

Manu Chhabria's too was a happy family. The three daughters (with the elder two, Bhavika and Komal, married) were directors on some Jumbo group companies.

Komal and Kiran were being groomed for positions of eminence in the company. According to sources close to the family, the eldest daughter, Bhavika, took little interest in the family business -- but started asserting herself once she realised that she was the heir, and wanted a share of the pie after all.

Today, the group's liquor business has been hived off. "It is the result of the lack of foresight and succession planning on former chairman Manu Chhabria's part. I would not be surprised if the rest of the businesses also get sold," says a former senior employee who was once close to the family.

But all Vidya Chhabria, chairperson, Jumbo group, has to say is: "Both Komal and Kiran have been involved with Jumbo for many years now. They have received quality exposure to large businesses. Now they have the freedom to unleash their entrepreneurial spirit for which Jumbo's eminent position in its industry will always act as a springboard."

This lack of succession planning and management and its repercussions in a public domain, has resulted in the crumbling of business empires, no matter what their size.

Is it a given that this is the way Indian corporates will wither away? Distinguished lawyer Abhishek Manu Singhvi says some corporate bosses fail to see themselves ever stepping down, which can have disastrous results after their demise.

"Even though there is no standard or magic formula to avoid the hostilities of succession after the demise of the father, the best way out is for the patriarch to clearly lay out the division of power between his heirs a couple of years before he sees himself as likely to exit," says Singhvi.

Something Rahul Bajaj has had the foresight to do in his lifetime. He says that most Indian public companies behave like private companies when it comes to succession planning.

"People used to say all kinds of things about me -- that I am aggressive, a workaholic, and will never step down, but I have made my succession crystal clear," he insists.

Analysts, though, question even Bajaj's succession plan. "Agreed, he has Rajiv as his successor as far as managing Bajaj Auto is concerned, but has he made a will and revealed it to the public?" asks a Bangalore-based analyst.

Not just that. Some corporates like to keep succession issues as vague as possible. For instance, Sahara group chairman Subroto Roy, who had recently gone "missing", has reportedly said that after him, Sahara will not have any owners but will be run by a trust that will make it impossible to split the group in the next 200 years.

Now, what sense are the 61 million-odd depositors to make of this? With an asset base of Rs 50,000 crore (Rs 500 billion) and interests in diverse sectors, and at 58, shouldn't Roy be clearer in spelling out his succession?

"Sometimes a patriarch wants to keep his sons in suspense till the last minute. If the succession is announced in advance, the heir may get complacent on the one hand, and relatives and professionals vindictive on the other," speculates a Delhi-based analyst.

However, others like Anil Sachdev, founder and CEO, GrowTalent Company, say trends are changing fast. "GrowTalent has been roped in by a large Indian conglomerate with global operations for its succession planning. And the company is not just restricting itself to the position of CEO but also of CFOs and other senior positions. I would say succession planning should not be just for family members but also for senior professionals," says Sachdev.

Increasing assertiveness among family members is certainly resulting in a more appropriate division of power, even in the absence of comprehensive succession planning.

So, at the Mumbai-based Piramal group, when Urvi Piramal (chairman Ajay Piramal's elder brother's wife) became vocal, her sons were entrusted with suitable responsibilities.

Urvi's two older sons, Harsh and Rajeev, have been placed in the textile and real estate businesses respectively. The third son is undergoing training in retail.

Swati's and Ajay Piramal's daughter, Nandini, did her internship at the company's bulk drug business before going abroad for higher studies; the son is doing a stint with a charitable foundation.

"We have no formal succession planning. We have educated all our children well, made them capable, and at a later stage, according to their interest and competence, they will take over different businesses depending on the board's consent," says Swati Piramal, director, Nicholas Piramal, dispelling rumours that the family is on the verge of a split.

Swati Piramal may believe the children are too young to get anything in writing just yet, but B K Modi, chairman, MCorpGlobal, did not have to wait for the board or shareholders to plan the succession for his children, as he has delisted all his companies.

Despite his children being young, he has insisted on spelling everything out in writing for them. As a result, Dilip (30, and with telecom), Ritika (32, with paper) and Divya (22, with real estate) have each been given Rs 50 crore in cash and assets.

"I have promised them another Rs 50 crore (Rs 500 million) each, depending on their competence to create wealth. Over and above what I have given them, it's up to them to add to it. And if they don't want to continue with it," says Modi, "they can hand the business back to me."

He says he has drawn lessons from his own experience and the battles he and his brothers fought with their uncles, as his father did not leave behind a clear will. "Besides, this is the practice used by many global companies," he says.

Vijay Mallya is also making his successor known at an early stage. He has inducted his 18-year-old son, Siddharth, on the board of the group's holding company, United Breweries Holdings.

Again, at the Apeejay Surrendra group, shareholders Priya Paul and Priti Paul, along with their mother Shirin Paul and uncle Jit Singh, unanimously selected Karan Paul, the youngest sibling, as chairman.

This came along with some restructuring for operational efficiencies. For instance, shipping was transferred from Priti to Karan.

"We worked on our succession plan for three years for which we went to IMD, Switzerland and did a course and consultations on global best practices. We also studied some successful Indian models like those of Tata Sons, Dabur and the Murugappa group. All three of us wanted to be together both in business and family matters. We came up with a trust structure and shared ownership. All three of us have our wills and have also planned for our future generation," says Karan Paul.

"Unfortunately, in the Indian corporate world, everyone thinks he is going to live forever and Indian laws support splits."

Which leads to the obvious question: why do most patriarchs shy away from laying out a succession plan? Some, like Onkar Singh Kanwar of Apollo Tyres, have not made anything public for successors Neeraj and Raaja Kanwar.

Business historian Gita Piramal says there are several reasons that lead to a patriarch turning reticent about this critical issue.

"One, there are emotional issues where the patriarch himself is unsure what to give whom; then there are issues of culture which compel the patriarch to give equal opportunities to all; then there are legal issues so that his will is not misinterpreted; and finally, there are issues of shareholding patterns," she says.

"Overseas, there are well-developed institutions like family foundations, etc." As part of the succession planning in her own group, Gita Piramal has resigned from the boards of VIP Industries and Blowplast and joined BP Ergo.

"I also have a well-laid-out succession plan for my two girls," she says. Both girls are students.

Whether a patriarch shuns or shirks his responsibility, shouldn't it be obligatory for him to let the board and its shareholders know what's on his mind? For instance, the M P Birla group is still in a state of shock.

Nobody in the family knew about Priyamvada Birla's will, where the successor turned out to be company auditor, R S Lodha. Today, Lodha has been elected chairman of Birla Corporation, the group flagship.

Why do succession problems not cripple the likes of General Motors, Sainsbury's or Walmart or, for that matter, any known global company? Analysts suggest: "Who's bothered?" For all practical purposes, Indian companies are family-owned businesses with promoters having the majority stake.

They are further complicated by a complex web of trust and investment companies.

"How can you call Wipro a public company when Azim Premji owns 84 per cent of the shares?" asks a Bangalore-based professional who has worked in both the public sector and the Reliance group.

He recommends that at least 25 per cent of the stock should be with the public, and tradeable, to make public companies more accountable.

"Besides, financial institutions, usually the second-largest shareholders, should be more assertive about making promoters reveal their intentions. Half of them don't even appear prepared for board meetings," he charges.

No wonder Anil Ambani's assertions on transparency, shareholders' concern and corporate governance did not cut much ice. No wonder Mukesh Ambani could get away with saying there were ownership issues but in the private domain.

Finally, what did the trick for them was their mother's intervention. But in the case of the government, where does the onus lie? The check and balance mechanism lies neither with the Company Law Board nor the Securities and Exchange Board of India, and as a result most public companies behave like private companies.

So, is it time that shareholders or board members started making a noise about the chairman spelling out his successor. Or have recent developments already set them thinking?