What has happened at CG Power is unprecedented. A storied promoter ousted by the company’s board. Of course, it could only happen because institutional shareholders now control the company by virtue of their holding. 

While the spotlight is now on Gautam Thapar, with the board having stepped in to salvage the value of holdings for the shareholders of CG, it’s not a glowing commentary on another CG — corporate governance. If there was, indeed, understating of liabilities and siphoning to the extent it is alleged now, how could it have escaped fiduciary vigilance over the years? Even more questionable is the role of auditors, who seem to largely walk away scot-free amid such misdemeanors. Clearly, they know which side their bread is buttered and are happy to toe the management’s line.

The lip service to corporate governance aside, company boards are usually stuffed with cronies or pliant independent directors who prefer to look the other way as the promoter bamboozles resolution after resolution that, at most times, shortchanges minority shareholders. The CG episode is the only possible instance in Indian corporate history where the hand that feeds has been bitten. What exactly transpired at CG Power and what led to the eventual unraveling is the subject of this edition’s cover story. As deputy editor Krishna Gopalan reports, it would have been unthinkable even for Thapar to foresee how drastically things would change over a decade.

With no one to look after the interest of retail investors, heeding Caveat Emptor is the only thing that can protect them. Would the recent development herald change at other boardrooms? Unlikely. However, lenders/strategic investors could now get hawk-eyed with promoters who have pledged a high percentage of their holding. Low promoter holding has always been interpreted as thin skin in the game. 

So, what one needs to look out for is similar occurrences at other companies. Warren Buffett is fond of saying, “There's never just one cockroach in the kitchen.” And economic turmoil is just the right time for vermin to crawl out.