A healthy mix of old-timers & conservatism keeps HDFC board going

Headhunters are forever in pursuit of Renu Sud Karnad. Though the managing director of HFDC generally turns them down, there are times she has acquiesced. The offers are not for regular CEO jobs —Karnad is a 37 year veteran of HDFC and the headhunters know better than that — but for directorships on company Boards. India Inc is desperate for women directors and Karnad certainly fits the bill. “HDFC is one of the few companies that allows its executives to us join other Boards, and I’m thankful for that. It’s something that has widened my vision,” she says.
Karnad is currently on the Board of heavyweight corporates like ABB, Bosch, WNS, East India Hotels, and to each of them she brings not just a lifetime of experience from HDFC but also the wisdom gleaned from her membership of HDFC’s own Board. If HDFC has been named one of India’s best Boards by the Hay Group-ET Corporate Dossier survey two years in a row, it is partly because it has some very eminent people as directors. Last Wednesday, is you threw a pebble through the Board room window of HDFC’s new headquarters in HUL House, Churchgate, (when a Board meeting was on full swing) you might have hit a former RBI Governor, an exchairman of SBI , or a former chief secretary of Maharashtra. No wonder vice chairman and CEO Keki Mistry says, “We rely on our Board for guidance on all matters.”

The character of the Board usually reflects the character of the company and HDFC is no exception. The organisation itself is a nice place to work and most executives who join it do not leave. At the Board level too, most of the directors are old-timers who have been there for decades. HDFC’s Board is also famous for its conservatism. Legend has it that the Board almost killed the proposal to set up HDFC Bank, believing it was too risky. Even when it decided to move ahead, HDFC decided to share the risk — and what turned out to the substantial returns — with a now defunct foreign bank.

Last year, when the company came up with a proposal to diversify into the education business by setting up a school in Gurgaon, it became a matter of lengthy debate at Board level. HDFC Chairman Deepak Parekh believes this is in the nature of the business the company is in — and in the nature of the Board. “Older people are conservative,” he says.

“This is a actually a good thing in the finance sector, where you need to be conservative.” Dr SA Dave, former chairman of UTI and SEBI, is 78 years old and has been on HDFC’s Board for 23 years. He believes the long tenures of the Board members has provided the company with a sense of continuity, which has worked well. “At one time or the other, we have all offered to resign and make way for younger people, but Deepak wouldn’t hear of it. He doesn’t want to break the continuity,” he says.

Given this philosophy, it is quite significant that two of HDFC’s long time independent directors resigned last year: Keshub Mahindra and Shirish Patel, both of whom were with on the Board since inception. HDFC now has the option of replacing them with independent directors or full-time directors. The company’s currently has eight independent directors and only three full-time directors on its Board and has room to promote more executives to the Board since Company Law allows for an equal number of independent and full-time directors. “We’ve always had far too many independent directors on the Board. Right now, we are not replacing the directors who have resigned, but when we do, we will bring in younger people, “ says Deepak Parekh.

HDFC, like many established companies, lacks technological expertise on its Board. In the digital era, this is a serious deficit. Renu Karnad, for her part, expects this will be addressed when the company begins a search for new Board members. “I look forward to having someone with a technology background on the Board. This kind of knowledge and experience has become very important to a financial services company today, and we have been lacking on this front,” she says