Why Are Some Big Investors Unhappy With Roshni Nadar, Chairman of HCL Technologies?

Roshni, 40, is non-executive chairman, while Nadar, 77, is chairman emeritus and strategic advisor to the board. Roshni’s husband, Shikhar Malhotra, is also a non-executive director on HCL Technologies’ 13-member board.

Earlier this month, HCL asked its shareholders to vote to reappoint Roshni as a director. The Nadar family owns 60.72% of HCL. Not surprisingly, the resolution was approved by all shareholders with 94.5%.

But not before public institutions, which own about 33.2% of the company, expressed some dissatisfaction. About a fifth, or 18%, of the major institutions voted against Roshni’s candidacy.

There is no publicly available data on how shareholders voted when Roshni first joined the board in 2013.

Voting record for director appointments is only available as of 2018. At the time, 12.7% of major investors rejected Roshni’s candidacy.

The thirty-second issue of this newsletter analyzes why some of HCL Technologies’ major investors are unhappy with the chair.

But first, let’s take a look at how big investors at other technology services companies have voted on similar proposals.

This year, five other IT services companies, in addition to HCL, sought shareholder approval to reappoint their promoters.

At Infosys Ltd, just 0.8% of the public bodies, which own half of the company, voted against Nandan Nilekani continuing as non-executive chairman. At Wipro Ltd, where Rishad Premji took over as Executive Chairman in 2019, 3% of major investors voted against Azim Premji continuing as a director. About 4% of major investors voted against Mindtree chairman AM Naik, while 5.6% of public bodies said no to the reappointment of Zensar chairman Harsh Goenka. Finally, 7.5% of major investors rejected Ashok Soota’s continuation at Happiest Minds Ltd.

It’s clear that there were more dissenters at HCL when it came to the reappointment of the chairman.

So what’s up?

Headquartered in Noida, HCL is the only IT services company to count its Chair on the Noida and Compensation Committee (NRC) of the all-important Board of Directors. This is a red flag for many of the world’s largest money managers, who advocate that the NRC should have only independent directors.

“We hold the members of the nominating committee responsible for their failure to ensure that all key board committees are fully independent. We do not support non-independent directors serving on key board committees,” argued British Columbia Investment Management Corp. (BCI), a major Canadian pension fund managing $200 billion in assets, when it voted against the proposal.

The California Public Employees’ Retirement System (CalPERS), which has about $500 billion in assets under management (AUM), and First Sentier Investors, the Australian wealth management giant with about $200 billion in assets under management the major investors who opposed Roshni’s reappointment, according to filings reviewed by Twich+.

Your author could not independently ascertain the individual involvement of BCI, CalPERS and FSI. But suffice it to say that this voting result reflects the thinking of other major investors.

However, this cannot be the only reason for investors’ disillusionment. Because Roshni has been part of the NRC since 2014.

So what explains this growing dissatisfaction in recent years?

In her annual letter to shareholders, Roshni didn’t see fit to write about HCL’s performance or discuss the IT services sector. Instead, her 530-word letter to investors is about corporate social responsibility. The graphic below best describes the core business of your company.

“At HCL Technologies, we have continued to learn, build and grow efficiently while expanding our customer base and increasing our share of wallet. With the depth and breadth of our portfolio, our strategy to build a nearshore presence, and deep relationships with our clients, we remain well positioned to capitalize on these new opportunities.”

This failure to talk about the IT business or HCL’s future is odd given that a chairman invariably takes the opportunity to impress current and potential investors with the company’s growth prospects.

This prompted one investor to question whether Roshni was hesitant or uninterested in heading up the company her father started.

A spokesman for HCL Technologies declined to comment.

Managing the board of directors is one of the most important duties for a company’s chief executive officer. Most companies see a change under a new chairman.

Since returning to Infosys in August 2017, Nilekani has reshuffled the board, adding five members, including CEO Salil Parekh, to the eight-member board. Rishad’s three-year tenure as Wipro chairman has resulted in the addition of four members, including CEO Thierry Delaporte, to the nine-member board.

Under Roshni’s two-year tenure, Vanitha Narayanan is the only new face on the board. HCL Technologies CEO C. Vijayakumar also joined the board last year after Nadar stepped down, but he has been CEO since October 2016.

Twich+ has argued in the past (in the sixth edition) that a Chairman-CEO Jugalbandi is essential for an IT services company.

Maybe it’s time for Roshni to break her silence and dispel doubts.

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