What Was Mahindra & Mahindra Thinking?

There are two issues at play in the Securities & Exchange Board of India Chairperson Madabi Puri Buch imbroglio. It is another matter that she is now being attacked by near comical sequential public revelations, extracted most likely from her own filings and disclosures and most probably leaked from within her office.

So the first issue of course is whether Ms Buch returned favours as a Sebi board member or Chairperson to various companies.

The second and I feel equally important, whether the companies who worked with her spouse sought any favours and whether they should have thought through their own actions.

There are several ancillary issues here which of course all arise from the fact that a private sector professional has moved into public life in a financial market regulatory role without the necessary public disclosures compared to a politician standing for elections has to disclose in an affidavit.

It is of course a continuing mystery to me why Ms Buch does not put out her family’s income statements and sources of income, for lets say, the last 7 years, once and for all, instead of playing whack-a-mole with the revelations as they come.

Now, back to M&M and the other companies who have done business with her spouse.

Ms Buch was a whole-time member with Sebi from April 2017 to October 2021. She became chairperson in March, 2022.

The Mahindra Group issued a statement last week saying that Dhaval Buch, who joined the company in 2019 after retiring from Unilever, was hired solely for his expertise in supply chain management.

"Compensation has been specifically (made) and only for Mr. Buch’s supply chain expertise and management acumen, based on his global experience at Unilever," Mahindra Group said.

Actually, compensation is not the issue here. A decision to work with the spouse, Dhaval Buch in this case, regardless of competence and qualifications, could not have been signed off by some junior human resources manager. There are bigger problems by the way if that was the case.

Picture a board room or a meeting of senior professionals of M&M taking a call on a supply chain professional who has to be brought in to resolve a critical supply chain issue in the company. Surely, someone would stand up and say that while he is very good and qualified, has even worked with us in the past and we like him but it may not be a good idea to sign him up now since his spouse is holding an important position in a body that one way or the other regulates our existence too.

Now the purists could argue that this is unfair to the spouse of the person in public life and the decision, if made on merit, should not sit on anyone’s conscience. Unfortunately, as is also quite evident, that is not how the real world works.

Speaking purely now as a long time observer of corporations, M&M should not have signed up. Nor should have Wockhardt’s affiliate company taken a house on rent from the Buch family in south Mumbai.

Further, I would argue that assuming the spouse joined public life later, then the company in question should take utmost care to ensure nothing changes that could even suggest there were favours granted.

The important thing is both companies mentioned could have easily found alternatives if they really wanted to. Unless, they were so oblivious to the potential real world ramifications down the line.

I would find that difficult to believe, at least the part that no one saw something like this coming.

Now the spouse. Yes, given that there is a wealth of genuine experience and qualifications, why should she or he (in this case) suffer?

Well he should not, but the price of public life is such that you can’t draw fine lines between your or your family incomes and then expect that it will withstand public scrutiny. They could argue that this is an unfair deprivation of income. Yes, it could be. In which case they could have easily decided jointly - something they are doing in their public statements now - not to take up a role in public life.

The explanation that each spouse is an independent professional and has every right to pursue their independent vocations, including in public life, does not wash very easily. Actually it does not exist anywhere in the world and scandals have erupted from time to time.

It's unfair but it's the real world.

But let’s go back to the companies in question, the giver and not the taker. No one is suggesting that these companies sought favours or got any and there is no real proof of that either.

But the fact that any listed company has to deal with a regulatory body all the time, should have caused the red flag to go up. All of which has led to a cloud over many parties at the same time and made worse by the fact that Ms Buch is not making a clean sweep public disclosure of her dealing.

As a shareholder of either of these companies (I am not) I would surely ask if there was really a need to stick one’s neck out in this fashion. Even if assuming there was total lack of oversight on this nuance - I once again do find that difficult to digest - this episode should be an object lesson to companies on their dealings in future.

Because regulatory heads may come and go, the companies and their reputations will be around forever.