Case Study

Corporate Governance
in a Family-Owned Corporate
Organization in India: A Case Study
of TVS Motor Company Ltd»
Shashank Shah*

Cood governance has been ari eternal source of inspired thinking and dedicated action. It is
a misnomer to think that the philosophy of corporate governance has come into existence
post the scarns that plagued the corporate world in recent times. In fact many family-oumed
corporate organizations have in place such practices for many decades. In recent times,
corporate governance mainly deals with two important stakeholders—-shareholders and
governmerit. The shareholders provide funds for the actual functioning, expansion and
diversification of the organization through the purchase of its shares, debentures or securities
and in exchange for this investment, they expect some tangible and monetary return either in
the form, of dividends or interest or sometimes ifthe company is really successful, through the
issue of bonus shares. The governvnent regulates the working of corporate organizations
through formulation of regulations which organizations need to follow both in letter and
spirit. In this paper, the author has attempted to study the shareholder and govemment-
related practices of TVS Motor Company Ltd.—a leading company in the two wheeler
automobile iridustry arid a part of the century old TVS Group. The case study is based on
triangulation of data based on personal interviews with top executives of the company, responses
to an executive perception survey and supplementary information available in the public domain.

COMPANY INTRODUCTION
Beginning with launching a simple, easy-to-use moped for the middle class in India in
the 1980s to launching seven new bikes in a single day (first time in the history of the
automotive industry iri the world), TVS Motor Company has often taken the unbeaten
path to innovation for ushering in the personal transportation revolution. TVS Motor
Company is the third largest two-wheeler manufacturer in India and one among the
top ten in the world. It has an annual turnover of more than $ 1 bn and is the flagship
company of the $ 4 bn TVS Group. The company has many firsts to its credit in the
automotive industry in India. It has been at the forefront in bringing a revolution in

Post-Doctoral Fellow, Department of Management Studies, Faculty of Management & Commerce, Sri Sathya
Sai Institute of Higher Learning (Deemed to be University), Prashanti Nilayam 515134, Anantapur District,
Andhra Pradesh, India. E-mail: shashankjshah@gmail.com
 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

the way personal commutation was happening, way back in the 1980s. TVS epitomizes
Trust, Value and Service.' ; • .. / . ,'
THETVSGROUF , • . . ' .
The TVS Group was established in 1911 by Mr. T V Sundaram lyengar. It is said that
during: the 1940s in Madurai, South Tamil Nadu, it was common to find people setting
their watches on the arrival of a TVS bus. As there were zero breakdowns, zero late
arrivals for a fleet with 400 buses, covering 40 stops, TVS was known for on-time
service. However, to the founder of the company, the ordinary ambitions of a bus fleet
operator or a vehicle servicing business would not suffice. He wanted to create an
enduring business led by a family of like-minded workers and managers united by a
set of shared high principles. Driven by this inspiration, the TVS Group has today
emerged as India's leading supplier of automotive components and is the largest
automotive component manufacturer in India. In nearly a century now, there are over
30 companies in the TVS Group (See Exhibit 1), employing more than 40,000 people
worldwide. It commands a strong presence in manufacturing of two-wheelers, auto
components and computer peripherals and also in the distribution of heavy commercial
vehicles passenger cars, finance and insurance.
T V Sundram lyengar and Sons Ltd. has a number of companies which are a part of
the TVS Group. Prominent among these are—Lakshmi Auto Components Ltd., Lucas
Iiidian Service Ltd., Axles India Ltd., Brakes India Ltd., Harita Graminer Ltd., India
Motor Parts and Accessories Ltd., India Nippon Electricals Ltd., Lucas TVS Ltd.,
Madras Auto Service, Southern Roadways Ltd., Sundaram Brake Linings Ltd.,
Sundaram Fasteners Ltd., Sundaram Finance Ltd., Sundaram Industries Ltd., Sundararri
Motors and Sundaram Clayton Ltd. (Refer Exhibit 1 in the Annexure for details about
the TVS Group companies).
TVS MOTOR COMPANY: MISSION STATEMENT^

TVS MOTOR COMPANY LTD.: MISSION STATEMENT

We are committed to being a highly profitable, socially responsible and
leading manufacturer of high value for money, environmentally friendly,
lifetime personal transportation products under the TVS brand, for
customers predominantly in Asian markets and to provide fulfilment and
prosperity for employees, dealers and suppliers.

Highlighting the purpose of business, the Chairman and Managing Director (CMD)
of the company says, "The basic purpose of business is to create wealth for all the

' Details are based on the information provided on the company website, accessed in August 2011.
' Ibid.
' As stated on the Company website, accessed in August 2011.
 SOUTH ASIAN, JOURNAL OF MANAGEMENT .

Stakeholders.'"* The company CEO also highlights the holistic purpose of a corporate
organization. He says:
The basic purpose of business is certainly profitable growth. Profit is required for
; inyesting in technology, investing in the future and part of it for investing in the
. ernployees itself because you need to have the right kind of people and if you
need to have the right kind of people you have to pay them and take care of
, them. Also, a portion of this money/these profits should go for social responsibility.
As a. corporate citizen, there are some things we haye to pay hack to our country,
. our people and our society.' . , !
The vision statement of the company details its concerns for all its stakeholders.
(Refer Exhibit 2 in tbe Annexure).
TVS MOTOR COMPANY: PRODUCTS
The two wheeler automobile industry bas a typical customer profile. Majority of the
customers belong to tbe younger age group. Personal transportation is mainly influenced
by personal aspirations and the changing demographic profile in India, the emerging
youth power and equality of sexes has further influenced this industry category.
The media which plays an important role in this regards has also substantially influenced
the purchasing decision. As per the statistics of 2002, the media reach in the urban
areas was about 80% and in the rural areas it was about 40%. From tbe years 1998-99
to 2002-03, the two wheeler industry in India, grew at a Compounded Annual Growth
Rate (CAGR) of 10%. Also from the period 1998-99 to 2003-04, the proportion of
geared scooters in the total share of two wheelers has gone down substantially from
33% to 4% and tbat of tnotorcycles bas increased from 35% to 77%. All tbis togetber
play ari important role On tbe type of products provided by a company in this industi^.
TVS Motor currently manufactures a wide range of two-wheelers from mopeds to
racing inspired motorcycles. These coUld be classified as:
• Motorcycles: TVS Apache, TVS Star City, TVS Flame, TVS Jive, TVS
Sport
• Variomatic Scooters: TVS Scooty Streak, TVS Scboty Pep +, TVS Scooty
Teenz, TVS Wegd ' .- .
• Mopeds: TVS XL Super, TVS XL Heavy Duty
• Three Wheelers: TVS King (International and Domestic versions)
TVS MOTOR COMPANY: AWARDS ^
The cornpany has won many awards and laurels—both, nationally and internationally.
Some of these include:
*• Personal Interview on April 14, 2008. • • • ¡
' Personal Interview on June 18, 2008.
' As stated on the Company website, accessed in August 2011.
 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

• The 2009 Progressive Manufacturer 100 (PM 100) award for end-to-end
automation of the entire business process of its lubricant brand—TVS TRU4.
• The Asian Network for Quality Award 2004—TVS Scooty Pep won the
prestigious 'Outstanding Design Excellence Award' from Business World and
National Institute of Design Management.
• The Chairman and Managing Director of the company—Mr. Venu Srinivasan,
was conferred with the prestigious JRD Tata Corporate Leadership Award
for the year 2004.
• The Technology Award 2002 from Ministry of Science, Government of India
for the successful commercialization of indigenous technology for TVS Victor.
• TPM Excellence Award—First category by Japan Institute of Plant
Maintenance (JiPm).
• The Deming Prize in Quality 2002—TVS is the only 2 wheeler company in
the world to be awarded the world's most prestigious and coveted recognition
in Total Quality Management.

OBJECTIVE OE THE CASE STUDY

The main objective of this case study is to study the shareholder and government-
related practices of TVS Motor Company Ltd. ahd to understand the attitudes and
perceptions of the senior most management of the company with respect to the company
policies towards these two vital stakeholders.

METHODOLOGY OE THE CASE STUDY

The case study methodology based on an exploratory and descriptive approach following
the evolving and now-popular anecdotal style of narrative has been used. The case
has been compiled based on triangulation of data from primary and secondary sources
of information. While the primary sources of information cohsist of responses to an
Executive perception survey on shareholders and the government and interactions
with senior executives of the company, the secondary sources of information consist of
information publisbed in the public domain. Details of each of these are provided.
PERSONAL INTERACTIONS WITH SENIOR EXECUTIVES OF THE
COMPANY
The case study data has been collected based on personal interaction by the authors
with top executives of the company and based on the following five parameters:
• Needs - The needs/expectations that the shareholders and the government
would have from the company.
• Constraints - The constraints/challenges faced by the company in order to
fulfill the needs/expectations of the shareholders and the government.
 SOUTH ASIAN JOURNAL OF MANAGEMENT

• Alterables - The alterables/best practices undertaken by the company in

order to satisfy the needs of the shareholders and the government or to
overcome the challenges/constraints that exist with respect to them.
• Strengths - The strengths possessed by tbe company with respect to the
shareholders and the government.
• Areas of Improvement - The areas where the company needs to improve
with respect to the shareholders and the government.
The parameters of needs, constraints and alterables as stated above are based on
the social systems engineering tools as proposed by Sage (1977) and Warfield (1976).
The senior most executives of the company were interviewed by the authors.
Table 1 provides the details.

Table 1: List of Interviewees at TVS Motor Company Ltd.

S. No. Designation' Type of Interview
1. Chairman and Managing Director
(Former President, Confederation of Indian Industry) Personal
2. President (Currently, President and CEO) Personal
3. Senior Vice President (Finance) Personal
4. Vice President (Business Planning) Personal

RESPONSES GAINED THROUGH EXECUTIVE PERCEPTION SURVEY

Responses were also gained by one of the
Figure 1: Respondent Classification
authors to an executive perception survey Based on Management Hierarchy
on shareholders and the government. This
consisted of 15 parameters relating to
various aspects and initiatives related to
33.3%
the shareholders and 6 parameters with
respect to the government undertaken by
the organization. 15 respondents across
different levels of the management
hierarchy within the company responded 60%
to the survey and indicated the level of
implementation of each of the stated
• Middle Level
shareholders and government-related D Senior Level
initiatives within the organization. B Topmost Level
Important observations relevant
The designations are as on the date of the interviews; the designations of most of the interviewees have changed
since then.

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 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

to the case study have been Figure 2: Respondent Classification

appropriately included. The Based on Eunctional Area
respondent details have been given •XT.
in Eigures 1 and 2.
SECONDARY SOURCES OE
INFORMATION
The interview and survey responses
have been supplemented by
information available in the public
domain through documents such as
the company annual reports, 20%
newspaper, magazine and journal • General Management D Operations/Production
articles and also information • Finance • Systems
available on the company website. D Sales/Marketing
• HR H Others
SHAREHOLDER
STAKEHOLDER MANAGEMENT: AN ÍNTRODUCTION
The company qualifies to be called a Family-Owned company as the majority shareholder
of TVS Motor Company is the parent company of the TVS Group - Sundaram-Clayton
Ltd. As stated in the annual report of the company for the year ending March 31,
2010, Sundaram-Clayton Ltd. and its wholly owned subsidiary holds 60.45% of the
shares of the company. 21.39% are with non-institutional holders, 5.48% with the
foreign institutional investors and 12.68% with banks and other financial institutions.
The board of directors of TVS Motor Company for the year ending March 31,
2010 consists of seven members. Dr. Venu Srinivasan is the Chairman and Managing
Director of the company. He is also the Managing Director of Sundaraiti-Clayton
and was appointed as the President of the prestigious Confederation of Indian
Industry (CII) for the year 2009-10. He is the Honorary Consul General of the
Republic of Korea in Chennai and has formerly held posts of President of the
Automotive Research Association of India and the Society of Indian Automobile
Manufacturers.^ His commitment to the TVS Group's founding fathers' value systems
and the desire and passion to excel within the boundaries of moral and ethical
business practices, are reflected in the company policies and procedures and have
emerged through this case study.
The TVS Motor Company board is a mix of family members of the TVS Group and
eminent experts from different fields. As Dr. Venu Srinivasan is an executive chairman
of the company, the corporate governance regulations mandate that in terms of
Clause 49 of the listing agreement, the board has to have 50% of its directors as

» The Hindu, March 28, 2009.

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 SOUTH ASIAN JOURNAL OF MANAGEMENT

independent directors. Hence the TVS Motors Board consists of two non-executive -
non-independent directors and four non-executive - independent directors.^
Based on discussions with the senior management of the company, a detailed list of
the needs-constraints-alterables. Strengths and areas of improvement with respect to
the shareholder as stakeholder have been collated.
NEEDS
I believe in creating value for my shareholders over the long-term; even if it means some
short-term sacrifices. How you establish the link with your shareholders is very important.'"
- Chairman and Managing Director, TVS Motor Co. Ltd.
Two important needs identified for the company's shareholders include:
'1. Value Creation - Shareholders would expect a steady stream of dividend
and constant appreciation of their investment in the company.
2. Good Corporate Governance - This would include many parameters as
highlighted by the SVP (Finance) such as—transparency, high ethical
standards, compliance with the laws of the country and operating efficiency
(generating adequate cash, cost control, credibility of the top management,
vision for future expansion and growth and research and development in
terms of innovation, customer understanding, etc., and ability to leverage
opportunities for future growth). He states that when the PE ratios between
different companies differ, the causes to the same can be traced to these
above mentioned factors.
CONSTRAINTS/CHALLENGES
In order to deliver the goods to the shareholders of the company, there are many
challenges to be overcome and constraints to t e tackled. Important among these are:
Competitive Challenges
These are common to any industry category and more so in a fiercely competitive two
wheeler automobile industry. These challenges include price drop, excessive spend
on media, launch of new products which can affect the sales of TVS products, threat
of substitution, market going down, rising interest rates, etc. The challenges are a mix
of both demand side and supply side issues.
The VP (Business Planning) describes the current competitive market scenario as:
Today the two wheeler industry is working on 53% capacity. The demand is strong.
Last year the demand had fallen by about 8% for motorcycles and 5% overall.
So there is a huge capacity and with new players coming in, it's going to be a
difficult task of managing the prices. It's difficult to lower the prices when the
competitor does it, as consequently the market share gets eroded."
' Annual Report of TVS Motor Company for the year ending March 31, 2010.
'" Personal Interview on April 14, 2008.
" Personal Interview on June 18, 2008.

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 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

Suppliers' Issues

Many times the suppliers are not able to manage tbe costs because of rising prices in
an inflationary economy as was seen in the first half of 2008. This leads to problems in
getting tbe raw materials from tbe key suppliers which is a major constraint in cost
management.
Corporate Governance is not a Ccmstraint
The SVP (Finance) opines:
I don't think that good Corporate Governance is a constraint at all. It enhances
the image of the company, lends credihility, and is actually an investment that
the company should make because tbe rewards are permanent and the ROI is
the greatest. If you know that this company is a good company, your suppliers
will trust you, your employees will stay with you and your customers will buy
your products. So Corporate Governance is a fundamental which every company
must practice.
Turbulent Times

Till about tbe beginning of 2007, there was not much problem because tbe two wbeeler
automobile industry was going through a rapid double digit growth and the automobile
industry including TVS was able to enbance tbe shareholder value. However, in since
2008, the company has gone through a tough time and the industry has declined by
almost 20% witb reduction in sales, increase in raw material prices and bigh level of
competitive activity. As a result the profit margin has come down.
Inspite of such a situation, the SVP (Finance) is reassuring. He observes:
In the long run if you see, the shareholder who has stayed with us has benefited
and his value has been enhanced. The turbulence in the industry will go over a
period of time. The turbulence was there because of tbe bankers and tbe
availability of retail finance. Tbe automobile industry is majorly dependent on
tbat. Suddenly wben retail finance was not available, the industry took a beating.
ALTERABLES/BEST PRACTICES
Tbe president of tbe company has given the highest importance to 'good returns'
when it comes to the company's shareholders. He states:
For an owper who has invested money, you have to give a return better tban the
normal return he can get otherwise. If I have some money, I wiU invest in the
normal way and I will get some return. So for the owner, we should give a better
return for wbatever amount he has invested than he would otherwise get outside.'^

" Ibid.
 SOUTH ASIAN JOURNAL OF MANAGEMENT .

The company is making attempts in improving its performance >vith its shareholders.
Some of these endeavors include: . , .
Maximizing Profit and Returns
The company has a business planning team which is responsible for operating profits
and its maximization through various channels—contribution improvement or cost
reduction. However, the PAT has reduced from '138 crore in, 2003-04 to '31 crore in
2008-09 and increased to '88 crore in 2009-10 (Refer Exhibit 4). The reduction in
profits could have been due to the turbulent times referred to by the SVP (Finance),
and an increase in the same could be indicative of improved circumstance in the
industry as well and internal improvement in company processes.
Enhancing Shareholder Value
Describing this process, the SVP (Finance) says: '
We always ensure that the operating efficiencies are kept as high as possible,
constantly institute the cost reduction programs, look at ways and means of
eliminating waste, planning on profit improvement projects—all this to ensure
that shareholder value can be enhanced. Predominantly we have seen that if
we are able to meet the top line plans (sales numbers) we are able to hit the
bottom lines (profits) also. So the top line is the key.'^
Policy Deployment Process (PDP) ,
This process includes industry analysis to market analysis to the volumes to be generated,
managing purchasing networks and optimizing the plants, etc. It's similar to the
Management By Objectives (MBO) process and is an annual planning process, t h e
PDP sets the targets and ensures fulfilling the Key Result Areas (KRAs) of the company.
Strategic Planning
The company has a strategic planning process in place which is essentially a three
year planning process for the customers, products, distribution, financing and other
enablers in terms of optimizing.
Geographic Spread

To explore hitherto untapped areas, besides merely financial measures, the company
has gone for geographic expansion as well. Since inception, the company's main
production focus was in South India—mainly at its Hosur and Mysore plants. However,
to benefit the shareholders, the company has now initiated new projects in North India.
It has started a new unit in the state of Himachal Pradesh because manufacturing
units started there are entitled to certain excise duty and income tax exemptions.
This would enhance the profitability of the company. The other plant of the company
set up in West Bengal in the latter half of 2009 is yet another addition to the company's
" Ibid.
 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

manufacturing facilities. The factory is located on a 64-acre plot at Uluberia in Howrah

district, around 50 kms from Kolkata. For the West Bengal plant, TVS has given
licence manufacturing rights to its ^partner Mahabharat Motors Manufacturing Co.
Pvt. Ltd., which is a joint venture between Indonesia's Salim Group and Prasoon
Mukberjee's Universal Success Enterprises, and tbus has not made any direct
investments. The manufacturing of two-wheelers in West Bengal also gives the TVS
brand additional visibility in tbe state and the eastern region of India.
Diversification
While diversifying geographically, the company has also diversified in newer product
areas. For nearly two decades the company's forte has been the two wheeler market.
However, now the company has also entered the three wheeler market (with its product
TVS King). This is a profitable segment and also less competitive than two wheelers.
Elaborating on these decisions and their benefit to tbe sbareholders of the company,
the SVP (Finance) states:
Entering that segment (three wheeler) enhances the product portfolio of the
company. During the last two years we have also ensured that we have introduced
products in the executive segment which is the main profit earning stream in a
motor cycle segment. We have also consolidated our share in the moped segment.
We have also created a good product in the ungeared scooter segment. Thus by
improving the product portfolio, enhancing the coverage across the country and
setting up fiscal units; we have taken steps which will enhance the shareholder
value in the long-term. These are the fundamental changes in the corporate life
which we think will be good for the shareholders in the long term.'''
Highlighting the importance of cost management to give good returns to its
shareholders, the company CEO opines:
Cost Management is also applicable to the shareholders. They are investing in
the company with a view to get better than what they would get outside in the
normal market. Price is given in the market. What we have to do is manage the
costs. Any organization which does not manage its costs will have problems.
I always believe that you can manage only costs. So, Cost Management is very
critical in any organisation.''
ORGANIZATIONAL STRENGTHS WITH RESPECT TO SHAREHOLDERS
The shareholders-related strengths of the company highlighted below are more
intangible and long-term focussed rather than quaritifiable and sbort-term oriented.
Good Products
The SVP (Finance) confidently asserts, "Our shareholders know that this company
will come out with products which are. good, innovative and if not the best, at least
close to the best in the market."'^ It is this customer confidence on the company
'^ Ibid. • •
" Ibid.
"^ Ibid.
 SOUTH ASIAN JOURNAL OF MANAGEMENT

which has played a major role in the company's customer-centric, processes and
innovations.
Trust
He also opines that the company's shareholders know that TVS is a company which
they can trust and which will take care of their long-term interests.
It is important to note that throughout the case, the senior most management of
the company have repeatedly emphasized on the need for taking care of the long-term
interests of the shareholders. While this could mean that they may sometimes be
relatively less successful in satisfying the short-term expectations of shareholders, they
would never compromise on the long-term safety and growth of the shareholders'
investments in the company.
Research and Development
The senior management of the company is confident that the customers and shareholders
know that TVS has a good research and development facility. This is a must for a
company which can make profits only by selling its products.
Customers' Knowledge
The senior management of TVS Motor also has the belief that the shareholders have
a lot of faith in the company's knowledge of its customers and the markets in which it
operates—both in India and abroad. This gives the company a unique edge over its
competitors and also plays an important role in increase in sales and profits which in
turn would give good returns to the shareholders. The SVP (Finance) says, "The
shareholders know that the company knows the customers in the markets in India
and also in the overseas market where we are exporting the product and that we will
come up with the appropriate technology in the product."
Highlighting the dilemma of the choice between short term versus long term
initiatives which would benefit the shareholders, the SVP (Finance) shares his
convictions and the philosophy at TVS Motor. He observes: ,
Every company will go through turbulent times, but corporate life is imniortal.
As a company we don't take short-term measures. These may be good for the
short-term but can cause permanent damage in the long-term. Many times it is
tempting to cut your investments towards R&dD or towards brand building. But
these investments are permanent and will give you returns over a period of
time. If you cut these investments, you will not be able to understand the
customers and come out with innovative features and will not be able to build
its brand. So though you may have solved a temporary problem, you have created
a permanent crippling problem for yourself. These must be avoided by any
company.

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 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

Responses to the Executive Perception Survey: Strengths

The responses to the executive perception survey from the company indicate the
following to be its strengths with respect to shareholders (in order of importance as
identified by the respondents):
• Business Excellence - The organization aims at achieving professional
excellence in all its undertakings.
• Values - The top management in the organization is sincerely committed to
the documented value systems and objectives of the organization.
• Corporate Governance - The organization's corporate governance policies
and practices are above industry standards.
ORGANIZATIONAL AREAS OF IMPROVEMENT WITH RESPECT TO
SHAREHOLDERS
The areas of improvement would include:
Newer Products - The company needs to explore areas in which it does not currently
have products and introduce the same to gain larger market share. For e.g., till very
recently the company had no presence in the large scooter format which accounts for
70% of the total ungeared scooters market.
Need for Geographic Expansion - While the company is exploring newer areas for
setting up units so that it can benefit from the tax concessions given there, the company
also needs to expand its presence in terms of appropriate sales and marketing presence
across the country. Its products are innovative and technologically superior,
manufactured using internationally renowned and state of the art manufacturing
processes. The company's quality standards have received international awards which
no other two wheeler manufacturing company in the world has achieved. But the
company's presence and uniqueness is not sufficiently visible in a fiercely competitive
two wheeler industry category. Currently, though it's ranked in the top three in the
two wheeler automobile industry, its presence is predominantly in south and central
India. It needs to tap more aggressively and strategically, the other parts of India
which it could explore in order to increase its market share and thus its sales and
profits which would give increasing returns to the shareholders.
Dividend Policy - The dividend policy of the company has not been very stable.
Dividend per share came downfi-om^130 in 2003-04 to ^0.70 per share for 2007-08 and
2009-09 and again rose to?1.20 for 2009-2010'^ (Refer Exhibit 4 for details). The company
can work towards a more consistent dividend policy. This is very crucial in recent times.
Though it is true that most shareholders look for long-term benefit, there is a sizeable
chunk of investors who are also interested in short-term gains. If the company's share
prices and dividend policy are attractive enough, it would be able to draw these

" Annual Report for the year ending March 31, 2010.

Volume 18J^-| No.3

 SOUTH ASIAN JOURNAL OF MANAGEMENT

investments into tbe company as well which it may not be currently attracting.
This would also give it the critical capital needed for expansion and diversification.
Responses to the Executive Perceptipn Survey: Areas of Improvement
The responses to the executive perception survey from the company indicate the
following to be its areas of improvement with respect to shareholders (in order of
importance as identified by the respondents):
f Shareholder WealthA'alue Maximization - The respondents opine that there
is greater scope for the organization to focus on 'shareholder wealth/value
maximization'.
• Return on Investments - There is greater scope for the organization to provide
a better return on sbareholders' investments.'^
• Sbareholder Empowerment - The organization can better empower the
shareholders by gathering feedback tbrougb appropriate engagement cbannels.
• Triple Bottom-line Reporting - Tbe organization can be seriously engaged
in bigb quality 'triple bottom line' initiatives and reporting.

GOVERNMENT STAKEHOLDER MANAGEMENT: AN INTRODUCTION

TVS MOTOR COMPANY: CORPORATE GOVERNANCE PHILOSOPHY
'The company believes in transparency, professionalism and
accountability which are the hasic principles of corporate governance
and that it would constantly endeavor to improve on these aspects.'
The government is yet another important stakeholder for the company from the
viewpoint of corporate governance. The company has two corporate governance
committees in place—audit committee and investors' Grievance committee. Details
about the composition and functioning of tbese have been provided by the company in
its annual report and company website. Unlike the normal custom, the company does
not have a remuneration committee in place as the board bas not felt tbe need to
constitute one. However, all the details about tbe remuneration to the board members
have been stated in tbe annual report of tbe company. Tbe company's corporate
governance pbilosopby bas been furtber strengtbened by adopting a code of Business
conduct and ethics and the code of conduct for prevention of insider trading for
board and senior management personnel (Refer Exbibit 3 for tbe code of conduct of
board members and senior management at TVS).
Based on discussions with the senior management of the company, a list of the
needs-constraints-alterables, strengtbs and areas of improvement with respect to the
government stakeholder have been collated.
" It is noteworthy to observe that the areas of improvement identified by the respondents through the survey and
those identified by the author based on interactions with senior management are very similar. The triangulation
of data thus validates the major issues.

Volume 18]^g2N°-3
 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

NEEDS . ' ... •.,,,.:

Two basic needs have been identified for the goverhment as a stakeholder which
would be common to any corporate organization. These include 'compliahce with the
laws' of the country which includes tevenue laws, labor laws, factory enactments and
many others; and also 'timely tax payment'.
There is another important need which the Company attributes to the goverhment
and that is the need for it to become a 'Green Company'. There is a movement within
the company towards beComing a Green Company with zero pollution and zero emissions
and contribute towards a cleaner environment. ,,
CONSTRAINTS/CHALLENGES •
In the opinion of the SVP (Finance), government regulations are not a constraint.
He says: '••' • '

With the host of measures taken after liberalisation in the last 15 years, within
the boundaries of law; companies are in a position to do what they want. This is
not a constraint. But where we would expect the government to be. of help, is by . -
giving a level playing, field in terms of the global competition.'^ ,
He feels that though the import tariffs have come down in line with the ASEAN
standards, the cost of capital and power in India is still high and infrastructure is not
adequate. These issues should be addressed by the government.
ALTERABLES/BEST PRACTICES ^ , !
Two best practices have been identified here. A ur^ique aspect in this case is that in
their interaction, the management has highlighted the need to implerrierit these both
in letter and spirit at all levels within the organization.
Corporate Governance
According to the SVP (Finance): . , ..
Corporate governance here is not only at the board level. Every employee, every
manager has to practice it. Ultimately the corporate governance in a company.
is the sum total of the behavior of all the employees. Over a period of time a
company develops its culture and value system, and perceptiohs Of people about
/ the company get formed. That perception is formed based on the bebayior of
the people. So any new person who has joined knows that in TVS we don't do
certain things. We follow all the rules of the country, we abide by all the
government regulations. We treat our dealers and suppliers as a part of our
extended partners. So these are the values that get inculcated in the employees.
Ohce the value systems are in place and are incorporated in the employees, it is
not difficult to practice corporate governance.^"

" Personal Interview on June 18, 2008.

» Ibid. - • , .

Volume 1 8 j g ^
 SOUTH ASIAN JOURNAL OF MANAGEMENT

The values-based approach of the company towards corporate governance emerges

through these observations of the SVP (Finance). Corporate governance is usually
considered the responsibility of the legal department in terms of fulfilment of certain
mandatory requirements with respect to formation of certain committees. In contrast,
the company believes that good governance is the responsibility of each and every
employee of the company and not just the top management or a particular department.
This is similar to the philosophy of total quality management where the responsibility
of ensuring quality of the product is not of the quality control department alone, but
of all those who are a part of the production process. Thus it can be said that good
governance is an outcome of the practice of certain organizational principles and
values systems by each and every employee of the company.

Legal Compliance
The company operates in different states of India and hence it might be difficult to be
up to date with all the legislative changes. In order to ensure that it follows the law of
the land wherever it works, it has taken the help of external law firms to study the
laws and ensure that it is complying with all the laws. The SVP (Finance) asserts,
"In my stay here of six years, we have not come across any situation where we have
found it difficult to comply with any of the laws."^'
ORGANIZATIONAL STRENGTHS WITH RESPECT TO GOVERNMENT/
REGULATORY AUTHORITIES
As regards the government as a stakeholder, the company feels that its strengths are
its value systems and its compliance to the laws of the land.
However, its CSR iriitiatives are also considered to be one of its unique strengths
with respect to the government. The SVP (Finance) feels, "When we talk of
governmental expectations, the government expects that we contribute to and take
care of the areas where we work."^^ The company through its own Srinivasan Services
Trust is doing a lot of work in the rural areas."
Responses to the Executive Perception Survey: Strengths (Government)
The responses to the executive perception survey from the company indicate the
following to be its strengths with respect to government (in order of importance as
identified by the respondents):
• Spirit of Law - The respondents opine that the organization sincerely abides
by all the laws and regulations of the government botb in letter and spirit.

" Ibid.
" ¡bid.
" For more details on the activities of the Srinivasan Services Trust, refer to www.tvssst.org

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 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

• Tax Payment - The respondents opine that the organization gives high priority
to contributing its share to, the national exchequer in the form of taxes and .
other social or governmental dues.
• Policy Making - The policy initiatives of the company are based on cordial
relations with the government, chambers of commerce and policy influencing ,
bodies like CII, FICCI, ASSOCHAM, etc. ,. , , .
ORGANIZATIONAL AREAS OF IMPROVEMENT WITH RESPECT TO THE
GOVERNMENT .
The SVP (Finance) states, "With respect to the government, I feel we are doing
everything. I don't think we are lacking anywhere in respect to compliance. HoweVer,
there is always scope for doing things better and faster."^'' ' • ••
The CMD very aptly highlights the various dilemmas that exist ini a business where
there is a desire to be ethical at all times. He says:
Meeting the law in letter and spirit is always a dilemma. You could meet the
law in its letter but not in its spirit. These dilemmas always exist. Because you
have Dharma (righteousness) as the basis of your actions, you have a dilemrna.
If you wouldn't have had Dharma as the basis, you wouldn't have had any
dilemmas. In such a case you would do what is expedient. The dilemmas always
come when you want to be ethical."
Responses to the Executive Perception Survey: Areas of Improvement (Government)
The responses to the executive perception survey from the company indicate the
following to be its areas of improvement with respect to government (in order of
importance as identified by the respondents):
• Joint Activities - The organization can share its facilities and skills (R&D
facilities, management expertise, etc.) for government-sponsored social
initiatives (for e.g., literacy drives, medical camps, village adoption, etc.).
• Participation - The organization can have greater representation on critical
advisory bodies, commissions, thirik tanks, etc.

CONCLUSION
By undertaking the above-mentioned analysis (based on the needs, constraints,
alterables, strengths and areas of improvement), greater visibility of the shareholder
and government-related issues of the organization can be highlighted for appropriate
organization-wide and industry-specific interventions.
Corporate governance seen in a broader perspective beyond the letter of the law
and incorporating the spirit as well would be more beneficial to corporate organizations
Personal Interview on June 18, 2008.
Personal Interview on April 14, 2008.

Volume 18]^^^ No. 3

 SOUTH ASIAN JOURNAL OF MANAGEMENT '

in their own long-term interest. Family-owned organizations have always paved the
way'for exemplary practices in many fields of corporate life. Examples of family-owned
organizations such as the Tata Group and the Godrej group are well known for their
philanthropic, societal and employee-related best practices.
TVs Motor cofnpany also belongs to that league of organizations and is a part of
the century-old TVS Group which has many best practices to its credit, even during
days prior ;to Indian independence. This case highlights the convictions and the
philosophy of the senior management of the company towards corporate governance
and the shareholder and government stakeholders. The senior management of the
cOrtipany including the chairman of the company who is the scion of the Sundaram
lyengar family has repeatedly stated that good corporate governance is an outcome of
the organizational culture and the collective commitment of the employees of the
organization to practice the law of the land in its true spirit. Corporate governance
cannot be relegated to the level of a legal requirement to be satisfied in order to be
reported in the annual report alone. It is a continuous process towards which the
entire organization needs to be committed on a daily basis.
As seen through this case, the top management of the company has also expressed
that long-term interests of the shareholders are more important to them than short-
term expectations. While the company may not have given outstanding dividend or
extraordinary profits every successive year. Yet, the top management is convinced that
the cornpany's shareholders have full trust in the company's innate capabilities, customer
knowledge, innovative products and processes and above all that the interests of the
shareholders are their prime concern. Hence they assert that this faith and trust in
the company has ensured that the shareholders continue their investments in the
company inspite of certain ups and downs that may occur.
This case study is an eye-opener for many organizations. It would enable them to
see corporate governance in a new light of values and principles.
Acknowledgment: The author would like to express his gratitude to Prof A Sudhir Bhaskar, Prof Peter
Pruzàufor their guidance. A Special note of appreciation to Dr Venu Srinivasan and Mr KN Radhakrishnan
from TVS Motor Company for their guidance and help in gaining access to senior executives of the company.

REFERENCES
1. Annual Report of TVS Motor Company for the year ending March 31, 2010. •
2.. Sage A P. (1977) Methodology for Large Scale Systems, McGraw Hill Inc.,
New York. • . . ,
3. ,The Hindu, March 28, 2009.
4. • TVS Company Website www.tvsmotor.in, accessed in August 2011.
5. Warfield John N (1976), Social Systems: Planning, Policy and Complexity,
Wiley-Interscience Publication, New York.
Volume 1
 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

APPENDIX

Exhibit 1: TVS Group Companies

TV Sundram Iyengar and Sons Limited (www.tvsiyengar.com)

TV Sundram Iyengar and Sons Limited operates through the three following divisions:TVS
Sundaram Motors Madras Auto Service.

TVS and Sons distributes Heavy Duty Commercial Vehicles, Jeeps and Cars. It represents
premier automotive companies like Ashok Leyland, Mahindra and Mahindra Ltd., Fiat and
Honda. It also distributes automotive spare parts for several leading manufacturers. TVS &
Sons has grown into a leading logistics solution provider and has set up state-of-the-art
warehouses all over the country. It has also diversified into distributing Garage equipment that
ranges from paint booths to engine analysers and industrial equipment products.

Lakshmi Auto Components Limited—Large OE supplier of two wheeler gears and

camshafts.

Lucas Indian Service Limited (www.lucasindia.com)—The company looks after the

distribution of auto electrical components all over India.

Axles India Limited—A joint venture with Eaton Limited, UK. Manufactures axle housings
and drive heads for heavy and light commercial vehicles.

Brakes India Limited (www.brakesindia.com)—A joint venture with Lucas Automotive,

UK. Manufactures foundation and hydraulic brakes as well as other products for automotive
and non-automotive applications.

Harita Grammer Limited—Manufacturer of automobile seats in collaboration with

grammar, world leader in the category.

India Motor Parts and Accessories Limited (www.impal.net)—One of India's largest

distributors of spare parts.

India Nippon Electdcals Limited (www.indianippon.com)—A joint venture with Kokusan

Denki, Japan. Involved in the manufacture of magnetos.

Lucas TVS Limited (www.lucas-tvs.com)—A joint venture with Lucas Industries, UK.
Manufactures a range of auto electric systems. Also develops and produces vacuum pumps
and gear starters with Hitachi Limited, Japan.

Madras Auto Service (www.mastvs.com)—India's largest retail network of auto spares.

Southern Roadways Limited—Giant in the Indian road transport industry, company operates
largest parcel service all over South India.

Sundaram Brake Linings Limited (www.tvsbrakelinings.com)—First Indian company to

manufacture asbestos-free brake linings, woven clutch facings and disc pads for automotive
applications.

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 SOUTH ASIAN JOURNAL OF MANAGEMENT

APPENDIX (CONT)

Exhibit 1 (Cont).

Sundaram Fasteners Limited (www.sundram.com)—India's largest manufacturer of tensile

fasteners. First company to receive ISO 9002 certification. Also principal supplier of radiator
caps to GM in US.

Sundaram Finance Limited (www.sundaramfinance.com)—Leading consumer finance

company in India.

Sundaram Industries Limited (www.sil.co.in, www.tvsrubber.com)—With a reputation

built over five decades, comprises several divisions: custom moulded rubber products, tyre
services and coach building. Also specialises in refrigerated trucks and bunk beds.

Sundaram Motors (www.tvsiyengar.com) (www.sundarammotors.com)—Major dealers

for Indian and foreign cars in South India.

Sundaram Clayton Limited—www.sundaram-clayton.com

Sundaram-Clayton Limited was established in 1962 in collaboration with Clayton Dewandre

Holdings Pic. (WABCO Automotive) pioneering the manufacture of air brake systems in
India. SCL enjoys a major share of the Indian OEM market as well as the domestic aftermarket,
which it caters to through a strong and well spread-out distribution network SCL-Brakes
division is the first company in India and fourth company outside Japan to win the Deming
award for achieving distinctive performance improvements through TQM.

Srinivasan Services Trust (www.tvssst.org)—The SST (Srinivasan Services Trust), an

organization initiated by Sundaram Clayton Ltd. and TVS Motor Company Ltd. for charitable
purposes, has been promoting community development programmes in Tamil Nadu, Gujarat,
Maharashtra and Karnataka.

Exhibit 2: TVS Motor Company Ltd.: Vision Statement

Driven by the Customer: TVS Motor will be responsive to customer requirements consonant
with its core competence and profitability. TVS Motor will provide total customer satisfaction by
giving the customer the right product, at the right price, at the right time.

The Industry Leader: TVS Motor will be one among the top two two-wheeler manufacturers
in India and one among the top five two-wheeler manufacturers in Asia.

Global Overview: TVS Motor will have profitable operations overseas especially in Asian
markets, capitalizing on the expertise developed in the areas of manufacturing, technology and
marketing. The thrust will be to achieve a significant share for international business in the total
turnover.

Volume 18 J^ggNo
 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

APPENDIX (CONT)

Exhibit 2 (Cont).

At the Cutting Edge: TVS Motor will hone and sustain its cutting edge of technology by
constant benchmarking against international leaders.

Committed to Total Quality: TVS Motor is committed to achieving a self-reviewing organization

in perpetuity by adopting. TQM as a way of life. TVS Motor believes in the importance of the
ptocess. People and projects will be evaluated both by their end results and the process adopted.

The Human Factor: TVS Motor believes that people make an organizatiori and that its well-
being is dependent on the commitment and growth of its people. There will be a sustained effort
through systematic training and planning career growth to develop employees talents and
enhance j o b satisfaction. TVS Motor will create an enabling ambience where the maximum
self-actualization of every employee is achieved. TVS Motor will support and encourage the
process of self-renewal, in all its employees and nurture their sense of self worth.

Responsible Corporate Citizen: TVS Motor frrmly believes in the integration of Safety, Health
and Environmental aspects with all business activities and ensure protection of employees arid
environment including development of surrounding communities. TVS Motor strives for long-
term relationships of mutual trust and interdependence with its customers, employees, dealers
and suppliers.

Exhibit 3: Code of Business Conduct and Ethics by the Board Members

and Senior Management Personnel
PHILOSOPHY OF CODE OF GOVERNANCE
TVS MOTOR COMPANY LIMITED (TVSM), in line with TVS Group philosophy, truly
believes in independence, responsibility, transparency, professionalism, accountability and code
of ethics, which are the basic tenets of corporate governance. TVSM always seeks to achieve
optimum performance at all levels in adopting and adhering to best corporate governance
practices. TVSM has always focused on corporate governance as a means to maxirnize long-
term stakeholders' value through disciplined and sustained growth and value creation.

CODE

This code of business conduct and ethics helps to ensure compliance with legal requirerrients
and standards of business conduct. The board of directors (the board) has adopted a code of
business conduct and ethics (the code) for all board members and senior management personnel
viz., all members of management one level below executive directors, including all functional
heads. Every board member and senior management personnel is expected to read and
understand this Code and its application to the performance of his or her duties, functions and
responsibilities.

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 SOUTH' ASIAN JOURNAL OF MANAGEMENT

APPENDIX (CONT)

Exhibit 3 (Cont).

COMPLIANCE OFFICER,
Company secretary is the compliance officer for the purpose of this code. The compliance
officer shall refer to the chairman of the board any complaint received for necessary action.
HONESTY AND INTEGRITY
All board members and senior management personnel shall:
• Conduct their activities, on behalf of TVSM and on their personal behalf, with honesty,
integrity and fairness;
• Act in good faith, responsibility, with due care, competence and diligence, without
allowing their independent judgement to be subordinated;
• Act in the best interest of TVSM, its various stakeholders including TVSM shareholders
and fulfill thefiduciaryobligations;
• Not engage in conduct that is likely to bring discredit upon TVSM; and
• Comply with every provision of this code.
CONFLICT OF INTEREST
All board members and senior management personnel shall not engage in any business,
relationship or activity, which may be in conflict of interest of TVSM or the group companies.
Conflict of interest may not always be clear-cut. Any question therefore about a board member's
or senior management personnel's actual or potential conflict of interest with TVSM should be
brought promptly to the attention of the Chairman of the board who will review the question
and determine a proper course of action including whether consideration or action by the full
board is necessary. Directors or senior management personnel involved in any conflict or
potential conflict situations shall exclude themselves from any discussion or'decision relating
thereto.
CORPORATE OPPORTUNITIES
All board members and senior management personnel shall not exploit for their own personal
gain opportunities that are discovered through the use of TVSM property, information or
position unless the opportunity is disclosed fully in writing to the board and the board declines
to pursue such opportunity.
FAIR DEALING
All board members and senior management personnel should deal fairly with TVSM's
customers, suppliers, competitors, officers and employees. No board member or senior
management personnel may take unfair advantage of TVSM's customers, suppliers, competitors
. or employees through manipulating, concealment, abuse of privileged information,
misrepresentation of material facts or any other unfair dealing practice. Gift or entertainment

Volumel8]^'7QNo.3
 CORPORATE GOVERNANCE IN A FAMILY-OWNED CORPORATE ORGANIZATION
IN INDIA: A CASE STUDY OF TVS MOTOR COMPANY LTD.

APPENDIX (CONT:)

Exhibit 3 (Cont).

in any form that is likely to result in a feeling of expectation of personal obligation'shoiild not be
accepted or extended.
CONFIDENTL\L INFORMATION
All board members and senior management personnel shall'maintain confidentiality of
information (price sensitive or otherwise) they receiye while being in office of TVSM and they
may also ensure security of information of TVSM.
CONFIDENTL\L INFORMATION OF OTHERS
TVSM is required to abide by the terms of, the relevant non-disclosure agreement arid limit its
use to the specific purposes for which it was disclosed and to disseminate it only to others with a
need to know the information. All boardmembers and senior management personnel shall not
attempt to obtain a competitor's confidential information by improper means.
PROTECTION OF ASSETS
The board and senior management personnel shall endeavour their best to protect TVSM's
assets and shall not use the same for personal benefit, unless approved by the board.
REGULATIONS
All board members and senior management personnel shall comply with all applicable
laws, rules, regulations and guidelines, including obligations under take-over and insider
trading regulations and shall report actual noncompliances, if any, of law, this code, or other
TVSM policies or procedures to the board. As a public company, it is of critical importance that
TVSM'sfilingswith the Securities and Exchange Board of India, the Reserve Bank of India and/
or the concerned stock exchange (s) on which the securities of TVSM are or may be listed be
full, fair, accurate, timely and understandable. All board members and senior management
personnel may be requested to provide information necessary to ensure that TVSM's published
reports meet these requirements. TVSM expects all board members and senior management
personnel to provide prompt and accurate answer to enquiries relating to its public disclosure
requirements.
WAIVER
Waiver of this code in any respect or respects may be made only by the board and will be publicly
disclosed if required by any applicable laws or regulation. As a general policy, the board will not
grant waivers to the code. Having regard to the business practices, or the legal and regulatory
framework applicable, the board will review, revise or update the code, as it deems appropriate.
AFFIRM COMPLIANCE
All board members and senior management personnel shall affirm compliance with the code on
an annual basis.
 SOUTH ASIAN JOURNAL OF MANAGEMENT

APPENDIX (CONT.)

Exhibit 4: Financial Highlights of TVS Motor Company

from 2004-05 to 2009-10
(? in cr)

Deatils 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05

Sales and Other Income
4,485 3,741 3,310 3,921 3,306 2,955
Depreciation and Tax
Profit Before Interest 242 189 132 203 275 291
Profit Before Tax 76 31 35 91 168 200
Profit After Tax 38 • 31 . 32 67 117 138
Net Fixed Assets 983 . 1,036. 1,043 1,003 794 770,
Share Capital 24 24 24 24 24 24
Reserves and Surplus 842 786 798 786 742 655
Networth 835 735 769 751 673 614
Total Borrowings L003 906 666 634 385 187
Earnings per Share (^) 3.71 1.31 1.34 2.80 4.93 5.79
Dividend per Share {^) 1.20 0.70 0.70 0.85 1.30 1,30
Book Value per Share (^) 34.79 30.63 32.04 31.29 28.04 25.58

Volume 18 J'7 2 No: 2

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