8/19/13 L&T’s Executive Chairman AM Naik slogging to find his successor - Economic Times

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L&T’s Executive Chairman AMNaik slogging to find his successorET Bureau Jun 9, 2013, 10.31AM IST

By Suman Layak and Sarthak Banerjee

As he turns 71 today, executive chairman of Larsen &

Toubro (L&T) AM Naik would love to hang up his boots. The

problem, though, is he can't find anybody to step into those

super-sized ones. As Naik took ET on a guided tour of

Mumbai's spanking airport terminal that L&T is building,

Naik shed light on his unfinished agenda - and what keeps

him awake at night:

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AM Naik lets the cat out of the bag when he admits there are a few bones in his body crying out for rest. "I

am slogging, day and night - 18 hours a day still. You think I would be doing it if I could help it?" Naik had, a

little over a year ago, given up the post of managing director to long-time colleague K Venkataramanan,

retaining the post of executive chairman for himself. He had been MD of L&T since 1999 and chairman since

2003.

IIAS, a shareholder proxy advisory service founded by Anil Singhvi (a former CEO of cement maker Gujarat

Ambuja) and Amit Tandon (a former MD of Fitch Ratings), had opposed a resolution seeking approval to

persist with Naik as executive chairman at the annual general meeting of L&T later in the year. IIAS had said

that Naik should have stayed on as non-executive chairman. Naik's plan, in April last year, was to hand over

the businesses reporting to him - 17 of them - one by one to Venkataramanan.

Today, Naik has stopped operating out of the L&T headquarters in Mumbai's old commercial district of

Ballard Estate; neither does he sit at the sprawling factory campus in Mumbai's northern suburb of Powai.

Instead, for the past two months the executive chairman has chosen the Landmark building, a few kilometres

away on the Western Express Highway, as his main office. He is the only director working out of that office.

But that's a feeble indicator of Naik attempting to gradually detach himself from the engineering and

construction giant. Rather, he is as firmly in the saddle as he's ever been, and is worrying about the

company's next 10 years.

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8/19/13 L&T’s Executive Chairman AM Naik slogging to find his successor - Economic Times

articles.economictimes.indiatimes.com/2013-06-09/news/39834852_1_executive-chairman-airport-terminal-k-venkataramanan 2/4

Naik is worried because there is no obvious near-term successor for the chairman's post visible - not at least

to him. "If I was running a new economy company, I would have lined up 10 successors without a problem.

If I was in charge of a bank, a financial services company, CPG, FMCG, IT...[such companies], there would

have been no succession problem. But there are no Indians available [to take on the leadership role] in the

entire industry - or anywhere in the world. I gave the last five searches over the last four years to five different

firms - without any restrictions - to create a team from any nationality. It is not yet possible."

On the way to the airport terminal that L&T is constructing, Naik points to an elevated Metro corridor that

Reliance Infrastructure is building and says: "No IIT engineer will come to supervise this. They all want an AC

office. I am now the chairman of the governing board of IIM Ahmedabad. In the past 15 years not a single

person from IIM Ahmedabad has chosen to get into manufacturing or the old economy or infrastructure."

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ANSWER MAY LIE WITHIN

But would Naik stand a better chance of finding a successor from within than combing the entire India Inc? S

Krishna Prakash, managing partner for India at global CEO search firm EMA Partners says: "The problem is

typical of successful corporations. A person from outside will always find it difficult to make an impact. The

answers lie within and it is probably best to catapult professionals from within to larger roles and take a bet on

their own people."

Naik has been criticised for getting a go-ahead to be executive chairman till 2017. This means that when

Venkataramanan retires as MD in 2015, Naik will have two more years to go. Perhaps after painting a mental

picture of one such critic, Naik thunders: "Let that man come and run this company."

Naik's solution to not finding a suitable successor has been to split the behemoth with Rs 61,471 crore in

annual revenues into smaller - and presumably more manageable - fragments. "The earlier I can get the

independent businesses listed one by one through IPOs and let them live on their own, the easier it will be to

find my successor for each of these simplified companies." DIVIDE AND LET IT RULE

Naik clearly sees an L&T that is much smaller as a standalone company, with its current myriad businesses

being spun off into subsidiaries that will eventually be listed. The various arms range from hydrocarbons and

solar power to water treatment and power projects, in addition to the core of engineering, construction and

infrastructure.

Naik adds he started almost all the new businesses in the past 35 years (he has spent 49 years with L&T) and

is therefore able to feel the pulse of each one of them. The argument thus goes that how would a chairman

inexperienced in these diverse operations be able to get a grip on so many of them.

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8/19/13 L&T’s Executive Chairman AM Naik slogging to find his successor - Economic Times

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8/19/13 L&T’s Executive Chairman AM Naik slogging to find his successor - Economic Times

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Readers' opinions (114)

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18 Jun, 2013 08:16 PM

Ex. L&T ite (Pune)

Mr. naik doesn't want anyone to replace him. This is his tactic just to stick L&T and not allow anyone to grow. Also

nobody from any reputed management institutes will join with the way Mr. Naik functions.

13 Jun, 2013 11:44 AMPandyan (Mumbai)

There is a serious dichotomy in the statement that there is no one in sight to become a successor. One of the

reasons could be that it is a self fulfilling prophesy. May be Mr Naik is quite happy to be in that situation. Lookaround, for example, Ratan Tata could find a successor for himself. It is happening when one tries seriously. A

successor is someone who takes over and brings her/his own vision to the role being played. But if we definethe successor as one who will carry on the old set model - however grand and successful - it has been in its

time, then it probably is difficult. That could be another reason. When a patriarch refuses to step aside it is the

organisation that pays for it in dear terms. Lastly it is not the age of the person occupying the chair that matters. Aperson in his/her 70s could be effective as long as he/she is able. That is independent of the succession issue.

13 Jun, 2013 07:19 AMJitendra Chaturvedi (Mumbai)

I think solution lies in dividing the business in smaller companies and it is probably best to catapultprofessionals from within to larger roles and take a bet on their own people...Not being able to groom next

generation leaders (if not No2) is one of the reason why succession often becomes difficult and sometimesbitter in India.

12 Jun, 2013 03:39 PMAkshay kumar (Haryana)

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12 Jun, 2013 03:31 PMAkshay kumar (Haryana)

The Cricketer, Actor and Boxer trio is a very unusual one to look at. But it is true that the trio Akshay Kumar,Vijender Singh and Harbhajan Singh generally workout together at Akshay’s home gym when the three are intown. Stay healthy, live better. Support and Follow Sh. Narendra Modi on Twitter with #NaMo4PM #NaMoForce

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