Edtech startup Byju’s yesterday appointed former Infosys CFO and board member T.V. Mohandas Pai and former State Bank of India chairman Rajnish Kumar to its board advisory council (BAC) — a newly constituted body to advise its founders on governance, after half of the startup’s board quit enmasse last month. Both Pai and Kumar are stalwarts of the Indian tech and startup ecosystem, and their willingness to serve as advisors to the beleaguered startup should provide solace to investors, employees and other stakeholders. Pai served as Infosys’ chief financial officer for over a decade and was one of Byju’s earliest investors through his fund Aarin Capital. Kumar’s success at SBI is widely known, but his role as the chairman of BharatPe’s board, where he faced off against its founder Ashneer Grover, will likely be more relevant for Byju’s.
This begs the question — why haven’t Pai and Kumar joined BYJU’S board, where surely they will be more effective in enforcing matters of governance? Isn’t the reconstitution of the board the need of the hour? Byju’s advisory council will advise and mentor the founders on ‘systems of governance and financial reporting’, organisational structure and strategic decision making. But isn’t this the job of the board?
Further, is it really advice that Byju’s needs? The startup has over 70 investors, who are all experienced and operate across geographies and sectors. They have navigated similar downturns in the funding ecosystem before and have advised several companies on building organizational bench strength. Its most recent board representatives — Prosus Ventures, Peak XV (formerly Sequoia Capital India), and Chan Zuckerberg Initiative — did not lack the knowledge or the expertise in matters of governance and financial reporting. Yet, despite having powers that came with being board members, they could do little over the past three years to provide basic guardrails for the company.
One doesn’t know if these industry stalwarts were reluctant to join Byju’s board, but it is a fact that the startup’s board faces unique compliance burdens. The Indian government, through the Ministry of Corporate Affairs, has ordered an inquiry into the startup. Byju’s has also been under the scanner of the Enforcement Directorate. It is a repeat offender when it comes to delays in financial reporting. So, there are real risks in joining a board where the founders have previously shown reluctance or inability to follow the board’s advice.
And yet, what Byju’s lacks is a board that has teeth and which can enforce basic compliance norms. It needs someone the founders can look up to and feel compelled to listen to. The board needs a chairperson who is charismatic enough to stand up to the founders and follow through on decisions.
To be fair, the advisory board appears to be already aware of the challenges. When Mint asked Rajnish Kumar if founder Byju Raveendran will listen to the advisory council’s advice, he offered a telling response. “He is bound to listen, I will put it that way,” he said.
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