Edtech startup Byju’s yesterday appointed former Infosys CFO and board member TV Mohandas Pai and former State Bank of India chairman Rajnish Kumar to its board advisory council (BAC) – after half of the startup’s board members replaced its founders on governance. A newly constituted body to give advice. Quit living en masse last month. Both Pai and Kumar are veterans of the Indian tech and startup ecosystem, and their willingness to serve as mentors to distressed startups should bring solace to investors, employees and other stakeholders. Pai served as the chief financial officer of Infosys for over a decade and was one of the early investors in Byju’s through his fund Aarin Capital. Kumar’s success at SBI is widely known, but his role as chairman of the board of BharatPe, where he faced off against its founder Ashneer Grover, will probably be of more relevance to Byju’s.
This begs the question – why didn’t Pai and Kumar join BYJU’S board, where they would certainly be more effective in implementing governance matters? Is the reconstitution of the board not the need of the hour? Byju’s Advisory Council will advise and guide the founders on ‘system of governance and financial reporting’, organizational structure and strategic decision making. But isn’t this the job of the board?
Besides, is this really the advice Byju needs? The startup has more than 70 investors, all of whom are experienced and work in various fields and sectors. He has faced similar downfalls in the funding ecosystem in the past and has advised several companies to build organizational bench strength. Its most recent board representatives – Prosus Ventures, Peak XV (formerly Sequoia Capital India), and the Chan Zuckerberg Initiative – did not lack knowledge or expertise in matters of governance and financial reporting. Yet, despite the power that comes with being a board member, he has done little over the past three years to provide basic security for the company.
One does not know whether these industry veterans were reluctant to join Byju’s board or not, but it is a fact that startups’ boards face unique compliance burdens. The Government of India through the Ministry of Corporate Affairs has ordered an investigation into the startup. Byju’s is also under the scanner of the Enforcement Directorate. It’s a frequent offender when it comes to financial reporting delays. Therefore, there are real risks in joining a board where the founders have previously shown an unwillingness or inability to follow the board’s advice.
And yet, BYJU’S lacks a board with sufficient capabilities to enforce basic compliance norms. It needed someone the founders could appreciate and feel obligated to listen to. The board needs a chairman who is charismatic enough to stand up to the founders and execute on decisions.
To be fair, the advisory board already appears to be aware of the challenges. When Mint asked Rajnish Kumar whether founder Byju Raveendran would accept the advisory council’s advice, he gave a befitting reply. “He’s bound to listen, I’ll put it that way,” he said.