In part two of the conversation, Marico's founder and chairman talks about how entrepreneurs can sharpen their edge in the marketplace to build a sustainable business with focus on corporate governance
Harsh Mariwala, founder and chairman, Marico, believes transparency and high standards of corporate governance—in letter and in spirit—must be the bedrock of an organisation. This is the starting point. But, nonetheless, as companies scale up and expand, governance often takes a backseat, and the interest of minority shareholders is frequently abused. But this must stop, he emphasises; shareholders, and not promoters, own the company.
“There is always a conflict between an organisation and its promoter. In many cases, one doesn’t know what is right. The thumb rule I use is that the organisation’s interest comes first and then the promoter’s. If some decision is to be taken, for example, when it came to me stepping down as the managing director of Marico, I just used that thumb rule. What is good for Marico? Should I continue or should I step down? And we came to the conclusion that I must step down. Though I was not ready to step down, I did. To me that is good governance,” Mariwala says.
In part-two of an exclusive interaction on Forbes India Pathbreakers, he also talks about how Marico sees the disruption from direct-to-consumer (DTC) brands as an opportunity and not a threat, and why Marico does not aspire to be a global brand. Here’s Mariwala’s playbook on what it takes to build a world-class consumer goods company in a rapidly evolving and highly competitive market. Edited excerpts:
Read Part 1: How Harsh Mariwala turned the tables on FMCG giant Unilever
If I am using some space of Marico for my personal need, it could be for a giving activity or for running my family investment office. One way is to say that the company belongs to me. But the other way is to say that, no, the company does not belong to me. I am the founder but I may have many shareholders. So, I have to differentiate this. I have to pay rent to the company for the area I am using for my personal use. To me that is governance. The problem with most promoters is that they believe it is their company (and not the shareholders’ company). The moment you have that mindset, you will do something which is in your interest and not the company’s interest. That has to change.
Change is brought about by stakeholders who are getting impacted; stakeholders like investors, advisories, employees. I think a lot of stakeholder pressure is coming in. Laws cannot have an impact beyond a point. But good, well-governed companies get good valuations. These are some market pressures that are making entrepreneurs move in the right direction.