India Inc's family feuds serve as both cautionary tale and policy cue

India Inc needs a new social compact that balances family control and public interest to ensure market resilience and its own

India’s corporate sector has long been dominated by family-run and promoter-controlled businesses. Over the decades, these businesses have powered growth, generated employment, and built household names. Yet, beneath this success story lies an uncomfortable reality — one where family feuds, opaque decision-making, and fragile boards increasingly threaten shareholder value and corporate governance norms. Recent controversies surrounding companies like Raymond, Religare, and Hero MotoCorp only reinforce the urgent need for a new social contract governing promoter control in India Inc.

 

The distinctive feature of Indian capitalism is its promoter-led ownership model. In nearly 70 per cent of listed Indian companies, promoters control over 50 per cent of equity, often combining ownership with executive authority. While this alignment can ensure long-term orientation and swift decision-making, it also raises persistent governance risks. Minority shareholders frequently remain at the mercy of family dynamics, private disputes, and opaque board decisions.

  

Recent months have brought these concerns into sharp relief. Marquee Indian promoter-led companies like Hero MotoCorp have come under the scanner over alleged corporate governance lapses and fund diversions, while the Religare Enterprises episode has been marked by prolonged disputes within the founding family, criminal investigations, and boardroom upheavals. At Raymond, a public spat between Gautam Singhania and his estranged wife Nawaz Modi Singhania — a board member herself — spilled into allegations of financial impropriety, control over personal and company assets, and questions about board independence. While promoters continue to enjoy decisive influence in these firms, such controversies spotlight the difficulties boards face in asserting oversight and independence in closely held businesses.

 

Why India’s boardrooms remain fragile:At the heart of these controversies lies a structural flaw — the weakness of independent oversight in promoter-led firms. Independent directors often lack both the numbers and the authority to challenge dominant promoters. Even when governance codes exist on paper, social ties, cultural deference, and economic dependence can blunt their efficacy.

 

The mandatory composition of boards, with at least one-third independent directors (and half in the case of listed entities without an executive chairman), was intended as a safeguard. Yet, high-profile cases reveal how independent directors can be marginalised or used as reputational cover rather than genuine checks on promoter power.

 

Moreover, related-party transactions (RPTs) continue to be a recurring source of governance risk. Despite the Security and Exchange Board of India’s tightening of RPT disclosure norms and shareholder approval requirements in recent years, enforcement remains patchy. The blurred lines between personal and business interests in family-run companies — especially concerning asset transfers, inter-company loans, and brand licensing — frequently expose minority shareholders to value erosion and operational risk.

 

The economic cost of family feuds: These disputes aren’t just reputational embarrassments; they have tangible economic consequences. Prolonged conflicts divert management attention, delay strategic decisions, and erode investor trust. Market capitalisation losses, operational disruptions, and regulatory penalties often follow, affecting not just the firms in question but investor sentiment in the broader market.

 

More importantly, in an era where global investors increasingly prioritise environmental, social, and governance (ESG) standards, recurring governance controversies risk depressing India’s market valuation premiums. Family control, once seen as a source of stability and continuity, now appears as a potential liability in capital markets seeking transparency, accountability, and independent oversight.

 

Need new social contract on promoter control: The answer isn’t to eliminate promoter control — nor is that feasible in the Indian context, given the depth of family entrepreneurship. What is needed is a rebalancing of power among promoters, boards, and minority shareholders. Several steps could help forge this new compact:

 

First, the role of independent directors must be meaningfully reinforced. Their appointment process should be made more transparent and insulated from promoter influence, with greater accountability to public shareholders. Regular training, clear tenure limits, and public disclosures of their performance and board attendance can help improve the quality of board oversight.

 

Second, disclosures around family-linked and related-party transactions need to become more granular and timely to reduce the information asymmetry faced by minority shareholders.

 

Third, companies should institutionalise formal conflict-of-interest frameworks within their boards. Clear protocols for identifying, disclosing, and managing potential conflicts — especially in family-led firms — would help boards navigate sensitive situations more objectively.

 

Fourth, promoter-led firms would do well to publicly disclose and periodically update their succession plans, bringing clarity to leadership transitions and reducing operational and market risks in times of personal or family disputes.

 

Lastly, regulatory processes for addressing governance breaches in promoter-led companies need to be more responsive and time-bound.

 

India’s promoter-led firms are at an inflection point. Their continued success in a globally competitive, investor-sensitive environment depends on how effectively they transition from private fiefdoms to accountable public corporations. The recent spate of disputes serves as both a cautionary tale and a policy cue. Promoters must recognise that control without accountability is increasingly untenable. Regulators, boards, and public shareholders, in turn, must assert their rights more proactively. A new social contract, balancing familial control with public interest, is essential for sustaining India’s corporate credibility and capital market resilience.