Saturday, September 17, 2011

Trouble in The Hindu: Fourth generation of a newspaper dynasty founders in search of a new business paradigm

It is a family that has always taken pride in its unity, discretion and commitment to public causes -- a family that has for four generations from its home base in Chennai (formerly Madras) published The Hindu, one of India’s most widely-recognised and respected newspapers. The Hindu has itself been in print since 1878 – longer than all other Indian newspapers, except The Times of India of Mumbai (Bombay) and The Statesman of Kolkata (Calcutta).

Yet The Hindu stands out even in this company in having been under the control of a single family – beginning with Kasturi Ranga Iyengar and now continuing with his great grand-children – since 1905. It is a family that has another unique claim among newspaper dynasties – through four generations, it has not ventured into lines of business that may conflict with core commitments. Individual members may have gone into their own lines of business, but never with a conspicuous impact on the principles of editorial detachment and fairness that the newspaper was loudly committed to.

The fa├žade of family unity had been breached on occasion, notably during junctures when consensus decisions on editorial and management control have been called for. These eruptions, most notably in 1990 and then again in 2003, pointed to stresses within the family owned newspaper as the number of stakeholders multiplied with each succeeding generation. But each eruption was contained and a new way found to continue with business as usual. It was expedient as tactics, but given the play of bristling egos within, not assured of enduring success as strategy. The intense discord that emerged to public view in March 2010 was perhaps, long foretold.

Events have since played out towards a bitter parting of ways between two factions within the family. A decisive moment came in April 2011, with the board of directors of the proprietary company of The Hindu, Kasturi and Sons Ltd (KSL), deciding by a majority of seven to five, to hand over the editor’s post to a person from outside the family.

The minority directors made no secret of their ire and obtained a stay on implementation of the decision from the Company Law Board (CLB), a statutory body dealing with matters of corporate governance. Relief for the minority proved short-lived, with the majority group successfully intervening first in the High Court based in Chennai to get the stay vacated and then having an appeal in the Supreme Court summarily dismissed without prejudice to the CLB’s final determination.

In July, Siddharth Varadarajan, a well-respected professional who was at the time bureau chief in Delhi, was formally appointed editor by the board, triggering off angry recriminations and the collective resignation (retirement in one case) of the minority faction in the KSL board from all executive positions. The minority five have with obvious intent, underlined their intention to continue as directors, pointing towards more turbulence in the boardroom in years ahead.

At the centre of the swirling controversy is N. Ram, editor-in-chief of the newspaper group and the most senior among the fourth generation of Kasturi Ranga Iyengar’s descendants to be actively associated with the business. With two younger brothers, N. Murali and N. Ravi, being respectively managing director of KSL and editor of The Hindu, Ram’s branch of the Kasturi family was dominant among the four that have shareholder interests in the newspaper. Murali has been his ally through earlier arguments over editorial control, though Ravi had in both 1990 and 2003, taken the other side.

As recorded in his letter of retirement and in recent statements made to the press -- in seeming contradiction to his public image of quiet efficiency and discretion -- Murali claims to have initiated in September 2009, a move to put in place norms on corporate governance and management succession on both the business and editorial side. The objective was to ensure that all shareholders got a fair share of responsibility and rewards. The basic premise was that all family members would retire from editorial and management positions at the age of 65.

Ram was under this plan, designated to retire in May 2010, to be succeeded as editor-in-chief by Ravi. In terms of the various publications under the group, Malini Parthasarathy -- a second cousin of Ram’s -- was to be editor of The Hindu and other top editorial positions, in the business daily, the sports weekly and fortnightly newsmagazine, were to be assigned within the four family branches, Positions on the business side were to be reserved for branches without sufficient representation on the editorial side.

Ravi and Parthasarathy had run The Hindu since 1991 and were as of 2003, designated as editor and executive editor. They then lost effective control, though not their formal designations, with Ram’s appointment, by a majority of eight to four in the board of directors, as editor-in-chief. The newspaper has since then moved on, though not with its accustomed placidity, since Ram’s very distinct editorial postures -- on India’s left-wing politics, China, Sri Lanka, not to mention one among the two parties that presides over the politics of his home state of Tamil Nadu – have been widely dissected and, for the most part, commented upon unfavourably.

The 2009 pact within the four branches of the KSL family, if at all there was one, proved rather ephemeral. In January 2010, Ram appointed three members of the fifth-generation, including his own daughter, to key positions in overseas bureaus of the newspaper group. The decision he later claimed, was approved without a “murmur of dissent” by the board of directors. Three shareholders though, including the children of Murali and Ravi, put on record their reservations in a strongly worded letter to the board: “It is essential that the board considers issues of corporate governance and the appointment of family members seriously .. The inequitable and arbitrary system that currently exists is not only unfair to non-family employees but to shareholders as a class as well. If there is ever any intention of instituting sound and modern corporate governance practices and discontinuing the feudal system that exists, then issues such as the ones we have raised need to be addressed squarely, honestly and without fear or favour”.

Concord was obviously not the prevalent mood when the KSL board assembled on March 20 last year, with editorial succession being among the principal items on the agenda. Ram assembled a bare majority in the twelve-member board to strike down Murali’s proposal that family members retire at 65 from active editorial and management roles. The board then appointed K. Balaji, a first cousin of Ram’s and Murali’s, as Managing Director, designating Murali as Senior Managing Director – a rather implausible title that barely camouflaged the very real effort to strip him of all substantive authority.

The story emerged in public view at this point, with the Indian Express – a newspaper which competes with The Hindu in a few markets, though not very effectively – on March 25 carrying a story headlined “Battle for control breaks out in The Hindu very divided family”.

Within hours of the Indian Express edition for the day hitting the stands, Ram responded with a news story on The Hindu website, assuring the author of the story, and the editor and publisher of the Indian Express, with civil and criminal defamation action.

It was a curiously petulant and undignified response by a journalist and public figure who has long been demanding that criminal law should not under any circumstances be applicable to the supposed offence of defamation. Rather quickly, Ravi responded with a posting on his twitter-page, asking how The Hindu, which “has taken a strong stand against criminal defamation”, could use it as a “threat to silence journalists”. Parthasarathy likewise, tweeted that journalists should never be “afraid of public scrutiny”.

In a later posting, Parthasarathy – one among three sisters who were the first women in the four-generation long history of the company to assume active management positions – spoke of rampant misogyny to which she would never again fall victim.

A blog-site had meanwhile come up, titled “Save the Hindu Newspaper”, promoted by persons with an overt posture against Ram. For the venerable old newspaper, which had with its sedate and somnolent style, earned a sobriquet likening it to Mahavishnu, the most remote, inscrutable and unattainable deity within the Hindu pantheon, the harsh glare of the public limelight must have been altogether unwelcome.

Murali secured a ruling from the CLB which set aside the changes on the management side. But Ram continued to have a majority in the board, which he used in April 2011 to push through Varadarajan’s appointment as editor.

Ravi responded by addressing a letter to the staff of The Hindu, seeking their understanding as the institution entered “a second, and what might turn out to be a prolonged, phase of conflict and turbulence”. Ram’s refusal to honour the agreed age of retirement, he said, had become untenable with the CLB ruling. His response it seemed, was to take “all the editorial directors – most (of whom) are in their 50s – into retirement with him with a scorched earth policy to ensure that no one in the family succeeds him”.

Ravi contrasted the image and performance of the newspaper in the years between 1991 and 2003 – when he actually exercised the authority of the editor – with what he described as a decline in public esteem since. The “distortions” that had crept into the “editorial framework”, he warned, would be “entrenched” with the decision of the board. “In the recent past, editorial integrity, he said, had "been severely compromised and news coverage linked directly to advertising”. The frequent public engagements of the editor-in-chief had also gained coverage in the newspaper “with a regularity that would put corporate house journals to shame”.

Ravi’s letter of resignation in July was even angrier in its tone, with references to the “deceit, lack of probity and bad faith” that had crept into “dealings among family members on the board with a clique being formed through exchange of unmerited favours”.

Murali in a letter written at the same time, spoke of his “anger, anguish and sadness at the horrible happenings” in the company and the “crude display of factionalism, vindictiveness, vote-bank and opportunistic politics and personal agendas by various board members”. These had seriously damaged the credibility of the “family run newspaper” and also “severely impaired the competitive ability and profitability of the whole enterprise”. If the “faction of the board” that had won the last rounds of battle were to persist “in its unsavoury ways”, then the “iconic 132-year old newspaper would have a very bleak future indeed”.

Parthasarathy the same day sent in her resignation, condemning the “strong family jealousies and prejudice” that had “intervened to pull away” all her “editorial responsibilities”. She had since, in her narration, subsequently endured “daily humiliations” in the belief that the board would finally do what was fair and just. But with her “legitimate professional aspirations” being “belittled and rudely rebuffed”, she had no alternative but resignation.

Nirmala Lakshman, sister of Malini Parthasarathy, wrote of her “deep sense of disappointment and sadness” at the attempt to reorganise the company “with little foresight, complete insensitivity, and a lack of grace and decency”. “With competitors making alarming inroads into our territory, functioning in this cavalier manner and playing the numbers game does not bode well for the future of The Hindu”, she warned.

Though the finances of The Hindu remain an area of opacity, there are sufficient indications that the newspaper group is under pressure now like never before in its history. The ongoing economic recession has cut deeply into bottomline figures across the industry, and advertisement revenue for The Hindu group is believed to have shrunk 40 percent in the course of the 2008 downturn. There has been a recovery since then, but the profit after tax is now estimated at less than a third of what it was in 2003.

All through its hundred year history at the helm of The Hindu, the Kasturi Ranga Iyengar family has stayed close to the knitting, identifying the newspaper as its core commitment, which would not be diluted by loyalty to any other business interest. The family has been seriously involved in sports and culture, though without implicating the newspaper as a whole in individual commitments. There was a project to develop a golf-course on the coastal sands between Chennai and the historic city of Mahabalipuram to the south, which absorbed much of the resources of the business group and was identified with one among the four branches of the family. The project collapsed without leaving a trace and there have been murmurs within the family branches that were not involved, about the serious lack of accountability for this colossal business misadventure.

In recent years, The Hindu has begun rather hesitantly, to get engaged in the TV news channel business, though with characteristic caution and conservatism. As competition built up – with the entry of the Deccan Chronicle into Chennai and especially with the Times of India launching an edition from the city – there were credible reports that KSL had begun exploring external sources of finance and had perhaps reconciled itself to selling a minority stake to a foreign investor.

The fragmentation of the family makes a decision arrived at with serious strategic forethought less likely than one made in pique. What this would mean for the future of one of India’s most respected newspapers, still remains a matter of speculation.

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