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Want to build a great institution? Uday Kotak suggests you play fair

According to Kotak Mahindra Bank founder, Gandhi's concept of trusteeship is as applicable to corporate India.

, ET Bureau|
Last Updated: May 01, 2019, 09.22 AM IST|Original: May 01, 2019, 09.22 AM IST
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Uday Kotak, founder of Kotak Mahindra Bank
Uday Kotak, founder of Kotak Mahindra Bank
Fair play above all else, seemed to be the underlying theme of billionaire banker Uday Kotak’s speech at a recent event in Mumbai.

In his remarks, the founder of Kotak Mahindra Bank observed that the time for the ‘raja-praja’ model of operating companies is passé. “It is extremely important that the concept of fairness is looked at from the eyes of the people who are putting their money and trust as minority shareholders in companies,” Kotak said. He added that it has been assumed for a long time that they (minority shareholders) can be taken for granted. But, according to him, this is changing.

Traditionally, the promoter was king. “He [promoter] can do whatever he wants with the profits of the company. And maybe he will decide to share some of the booty with the praja, which is the minority shareholders of the company,” Kotak said.

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The Indian corporate sector has been replete with examples of “disproportionate treatment from the point of view of fairness between promoters and minority shareholders of the company”. This, he exhorted, must end.

According to Kotak, the concept of trusteeship started by Mahatma Gandhi keeping India in mind, is as applicable to corporate India. He said, “Promoters and directors are trustees for all the stakeholders, including the shareholders. And as trustees for all the shareholders, their interests are aligned with every shareholder because in that lies the best value for the promoters’ own shareholding as well.”

He added that the concept of trusteeship in companies, which are not 100 per cent-owned by a single promoter, is fundamental to building great institutions.

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