Chennai: Parry’s Corner in Chennai is a bustling business hub, having got its name from the founder of the company that still bears his name. The 19th century art deco Dare House at the site houses EID Parry (India) Ltd and other businesses of the Murugappa group that owns it.

EID Parry is the largest sugar producer in south India and the fifth largest in the country. It’s also present in bio-pesticides and nutraceuticals. The company also has a significant presence in the farm inputs business through its Coromandel International Ltd subsidiary. It’s also buying the 49% stake in Silkroad Sugar Pvt. Ltd held by joint venture partner Cargill Asia Pacific Holdings Pte Ltd to make it a fully owned unit.

It was in 1788 that Britisher Thomas Parry landed in Chennai and registered as a free merchant. He founded East India Distilleries and Sugar Factories Ltd, which set up the country’s first sugar plant at Nellikuppam in 1842. East India Distilleries and Sugar Factories merged in 1962 to form EID Parry Ltd. Two decades later the company was struggling to survive because of labour issues. In 1981, M.V. Arunachalam of the Murugappa group took over the company and became chairman. Currently, his son A. Vellayan is chairman and Ravindra Singhvi is managing director of the company.

The Murugappa group traces its roots to 1900, when businessman Dewan Bahadur A.M. Murugappa Chettiar began a money-lending and banking business in Burma, now Myanmar. The group has a presence in 28 businesses that include engineering, abrasives, finance, general insurance, cycles, sugar, farm inputs and plantations. With manufacturing facilities spread across 13 states, and a workforce of more than 32,000 employees, the $4.4 billion (around Rs.23,848 crore today) Chennai-based group is an example of how a family managed group has transformed itself into a corporate entity run by professionals. In 1999, when M.V. Subbiah, the grandson of A.M. Murugappa, decided to step down, he brought in an external chairman for the group and let the family take advisory positions. The businesses of the group were all handed over to professional CEOs from outside the family. That decision, unusual then as now for a family-run group, is one of the key reasons why EID Parry has one of India’s best-managed boards.

The Murugappa group today relies on a fairly compact corporate board consisting of three external independent directors, three executive directors and two family members. Each director on the executive board also doubles up as a lead director for various businesses of the group. For example, M.M. Murugappan is the lead director for Carborundum Universal Ltd and Tube Investments of India Ltd, while N. Srinivasan, director-finance of the group, is the lead director for the financial services business.

This top decision-making body of the group, the Murugappa corporate board, reviews various business matters that include governance, business development, talent and succession planning, besides environment and social responsibility. The board members also review the business performance of various group companies on a quarterly basis with the respective business heads.

The board spends 12 days a year with the group and in that time, discusses earmarked subjects from people assessment to portfolio assessment, growth plans and governance issues. “They have experience from other companies around the world, which they bring to bear and share with us. There are issues within our companies itself for which we take advice from them,” said Vellayan, chairman of EID Parry and executive chairman of the Murugappa group.

Further, each of the group companies also has a statutory board in place, the members of which are responsible for strategy, business plan development, regulatory and compliance requirements, performance and capability building.

The role of the family in the group is kept to a minimum by design. The only two family members on the board are Vellayan as executive chairman of the group and M.M. Murugappan as vice-chairman.
Ram Savoor, an external director at EID Parry, pointed out that the Murugappa group has done this to ensure that decisions are purely professional in nature.
 
“Any board heavily loaded with family members can get any resolution carried through easily at the expense of minority shareholders,” he said.

In companies such as those run by the Murugappa group, where family members are in a minority on the board, proper care is taken to give due importance to minority shareholder interests.

“In the case of EID Parry, I have never experienced any pressures to approve family interests before minority shareholders’ interest,” he said.