Daughters step into board rooms as SC verdict clears decks

Armed with a recent Supreme Court judgment mandating equal rights on inherited wealth, daughters from family-run businesses gently began pushing their way into company board rooms in 2011. This is a departure from settling for their dues within closed doors as per the wishes of family elders before and after marriage.

“Many female family members have started planning with the right to parents' ancestral wealth,” says Haigreve Khaitan, partner at 101-year old law firm Khaitan and Co.

Consequently, “the trend of daughters getting married into wealthy families and sons to any family have declined.”

A Hindu woman or girl will have equal property rights along with other male relatives for any partition of inherited wealth after September, 2005, the Supreme Court ruled on October 11, 2011.

A bench of justices RM Lodha and Jagdish Singh Khehar said under the Hindu Succession (Amendment) Act, 2005, daughters are entitled to equal inheritance rights along with male siblings, which was not available to them prior to the amendment in 2005.

The apex court said the female inheritors would have not only succession rights, but also the same liabilities attached to the property along with male members.

“Now, Indian businessmen of the Marwari and Gujarati communities take an undertaking from the daughter relinquishing their rights to the family wealth during the marriage,” says an industrialist who runs a R2,500-crore business.” “The new rule may find it difficult for them to give up their rights and equality may evolve over a period of time.”

Business families gift property, money and gold to their daughters during marriage. He or his firm cannot be quoted on sensitive issues.

“We are getting more inquiries from wealthy family business men on wealth planning,” says Khaitan of Khaitan and Co. “What has come to us are primarily women demanding their rights to ancestral wealth.” “Earlier, they were unaware of their rights.”

Female family members armed with prestigious business degrees are now part of many board rooms driven by succession planning. Last week, Priya Agarwal, 22, joined as additional director on the board of oil explorer Cairn Energy India owned by her billionaire father Anil Agarwal.

Priya is a management grad from Warwick School of management, from his immediate family and the youngest member on Cairn, which her father purchased for $12 billion in 2011. “The trend is obviously an extension of highly qualified women managers running successful companies,” says professor Satyajit Majumdar, who teaches management and labour studies at the Tata Institute of Social Studies. “Quality education, changing social norms and acceptance of daughters by business families will have more female members running family businesses.”

More young daughters of businessmen at family businesses are being groomed as successors. In May, 2011, TVS Motor chairman Venu Srinivasan's daughter Lakshmi Venu, 28, took over as vice-president, global business development and strategy at the group's auto component maker Sundram Clayton, as part of grooming her as successor to the country's third-largest two-wheeler maker.

Some business families have unique ways of grooming their children.

Reliance Industries's late founder Dhirubhai Ambani sent elder son Mukesh to a petrochemical plant site after he returned from Stanford School of Management and younger one Anil to learn the art of recruitment with late VV Bhatt, Reliance's human resources executive. Mukesh later built Asia's largest refinery in 19 months and Anil launched India's first 100-year bond issue to raise money.

Some lawyers disagree that Supreme Court rule helps female members a right to family assets and run companies. “I don't see the rule as reason for female members to come on board as rule has right only on ancestral wealth and not on self-made,” says Suhas Tuljapurkar, managing partner at law firm Legasis Partners. “It depends on individual aspirations.”

“Inherited wealth accumulates over a period of time and it is a question of equality,” says Khaitan of Khaitan & Co. “With a focus on the operational aspect of the business, family-owned Indian companies which have been lax in succession planning are changing fast,” says Radhika Vohra, associate director, Control Risk, a global risk consultant specialised in helping organisations manage political, integrity and security risks in complex and hostile environment. “From a corporate governance perspective, gender diversity in management with a focus on experience and expertise rather than familial relationships will result in appreciation of intrinsic shareholder value,” she said.

Gender equality is gaining momentum in small business families too. “Many small family business are keen to include both daughters and daughters-in-law in business now,” says TISS' s Majumdar who is also a consultant to many family-run businesses. “It depends on where the daughter is getting married, acceptance in the husband's family and social norms.”