Indian Hotels Company: Rated five stars for corporate governance

Interview with Puneet Chhatwal – Managing Director & Chief Executive Officer, Indian Hotels Company Limited (IHCL)

Ethical Boardroom talks to Puneet Chhatwal about IHCL’s foundation of integrity, transparency and ethical values

Ethical Boardroom: The Indian Hotels Company Limited (IHCL) is part of the TATA group of companies – synonymous with ‘Best in Class’ ethical practices. Can you tell us about IHCL’s philosophy and how it adheres to the TATA business excellence model?

Puneet Chhatwal: India’s Tata Group has come to represent a global hallmark of quality. The subcontinent’s largest corporate conglomerate, Tata Group is recognised both at home and abroad for its ethical and transparent business practices. The Group is considered also a pioneer of governance, sustainability and responsible investing. By putting in place a solid and comprehensive governance framework, Tata Group has mitigated risks and established a reputation for fairness in all its dealings.

Part of the Tata Group, the Indian Hotels Company Limited’s philosophy on corporate governance is laid on a foundation of integrity, excellence and ethical values which have been in practice since its inception. Strong leadership and effective practices have been the company’s inherited values from the Tata culture and ethos. This is a reflection that corporate governance practices are an integral part of all company activities, which help ensure efficient conduct of the affairs of the company by involving all stakeholders, without compromising its core values.

Excellence is a continual quest at the Tata Group and Tata companies are supported in their efforts to achieve world-class standards in all aspects of operations through group-level processes and systems that encourage and enable business excellence. IHCL uses the Tata Business Excellence Model (TBEM), which covers business aspects that range from strategy and leadership, to safety and climate change. The ethos of the TBEM model is to enhance value for all stakeholders and contribute to marketplace success, maximise enterprise-wide effectiveness and capabilities, and deliver organisational and personal learning, which is the base of the corporate governance philosophy of the company.

IHCL insists that suppliers adhere to the same high standards with respect to human rights, health and safety, gender equality and corporate social responsibility, amongst others. Already 67 of the group’s 79 hotels possess the coveted Gold certification for sustainability and environmental care. By the end of the current year, all of its hotels are expected to have obtained the certificate.

IHCL has recently been bestowed with the ‘Best Hospitality Corporate Governance in India 2018 Award’ by Capital Finance International (CFI), a leading economic & financial journal, headquartered in London. IHCL was the only hospitality company in India to have won this award. This award reflects our commitment to conduct business in an inclusive and transparent manner. Besides adherence to ethical practices in business, our company embraces best practices for governance continually to move towards long-term sustainability.

EB: You took the helm at IHCL just over a year ago; what steps have you taken to develop the company’s governance practices?

PC: The benefits of effective governance for companies includes more strategic thinking, improved decision-making processes, proactive risk management and, ultimately, leveraging investment and capital at more competitive rates. At IHCL we have been more proactive in the establishment and monitoring of strategy, including those objectives that underpin growth. We have re-assessed how well the organisation is positioned to attract and retain the skills and resources necessary to deliver the strategy and at the same time remained alert to developments in competition and innovation.

We are well aware of the new and emerging trends in the use of technology and data, digital marketing and social media, which help us identify and monitor risks as they develop and emerge, including financial, operational and compliance-based risks. Besides these, in the past one year we have taken the following steps to enhance the company’s governance practices:

• Aligned the governance structure with the growth of the company
• Identified and promoted the intangible asset of culture that is desired and suited to implementation of governance measures and ensuring that the tone is set across the organisation
• Established clear lines of accountability among the board, chair, MD, executive committee members and management
• Ensured more diverse board composition, which would have a significant impact on the boardroom culture of decision-making
• Adopted a conflict of interest policy, a code of business conduct, which sets out the company’s requirements and process to report and deal with non-compliance, and a whistle-blower policy with responsibility cast for oversight and management of these policies and procedures

In addition to the mandated corporate governance requirements as per the SEBI (Listing Obligations and Disclosure Requirements, or LODR) Regulations 2018, the company has adopted more stringent governance guidelines.

EB: Having a strong, independent board is one of the pillars of long-term value creation. Can you describe how independent directors enhance IHCL’s board?

PC: Independent directors act as a guide to the company and are the cornerstone of corporate governance. Their roles broadly include improving corporate credibility and governance standards, functioning as a watchdog and playing a vital role in risk management. At IHCL, independent directors play an active role in various committees set up by the company to ensure good governance. Their presence on the board helps to minimise the potential occurrence of conflicts of interest as much as possible, which is certainly a first step towards building trust. They play a crucial role in bringing objectivity to the oversight function of the board and decisions made by the board of directors, thereby enhancing board effectiveness.

While they do not take part in the company’s day-to-day affairs or decision-making, they ask the right questions at the right time regarding the board’s decisions by raising the appropriate red flags to avoid the occurrence of unwanted situations and their consequences to a great extent.

EB: Effective communication within an organisation is critically important for corporate governance structures to succeed. Tell us about IHCL’s stakeholder engagement strategy and why you believe it’s important to have open dialogue.

PC: At IHCL we believe that corporate governance should be able to inspire stakeholders to willingly embrace the principles of good governance. To achieve this, effective communication systems to influence opinion, attitude and behaviour changes among stakeholders are imperative.

Many of the governance problems we see or hear about, are an embodiment of disconnects between and among stakeholders. Communication can be traced to all governance activities, such as accounting and auditing, disclosure, integrated reporting, board effectiveness, corporate citizenship, social responsibility, ethical conduct, etc. The principles of fairness, inclusiveness, transparency, accountability and rule of law are the key elements of communication with the stakeholders.

Our vision as a business is to be a customer-focussed company, trusted by our communities and stakeholders. We recognise and embrace the fact that effective engagement with our stakeholders is key to our success in realising our vision as a business, and we see the role of stakeholder engagement as both broad and deep.

At our company, leadership inspires people to walk within principles of good governance by connecting with stakeholders. Timely reporting of data to the shareholders and board members creates an atmosphere of trust between all stakeholder relationships. IHCL, through integrated reporting and disclosure, presents its periodic financial statements and annual reports, which provide a channel for communication among shareholders, board and management and other stakeholders.

Engagement covers all the different ways in which we involve stakeholders in what we do – from simple information provision, through to the gathering of views and feedback, to joint working, problem-solving and strategic planning. The objective of our stakeholder engagement strategy is: “To continually improve how we engage with stakeholders across all aspects of our business – in order to identify and realise opportunities to inform, understand, problem-solve, plan and deliver better against our vision as a business.”

Engaging with individuals, groups and organisations that are affected by our activities and responding to their concerns makes us perform better. It increases our knowledge and contributes to how we operate in the future. It brings benefits to the organisation, including improvements in reputation, resilience during difficult situations, risks management and in shaping the long-term business. Our governance structure for stakeholder engagement ensures that we have appropriate processes and opportunities in place to gather and develop strategic opinions, and to engage to make and implement decisions in line with these opinions.

EB: Gender board diversity is a relatively new concept in Indian boardrooms. What progressive steps has IHCL undertaken to ensure that women are represented on the board?

PC: As a Tata Group Company we believe that gender diversity in the boardroom is fundamental. A boardroom is where strategic decisions are made, governance is applied and risk is overseen. So, it’s imperative that boards are made up of competent, high-calibre individuals who offer a mix of skills, experiences and backgrounds. Globally and in India, the call for gender diversity on corporate boards has gained momentum due to certain legislative actions. The Companies Act, 2013 provides that certain classes of companies must have at least one female director and additionally, as per the LODR regulations, every listed company shall have at least one female independent director.

These regulations have given women a voice in the boardroom. Women directors tend to be more protective of the company’s assets, employees and reputation, and generally ensure greater scrutiny of board considerations and decisions. IHCL has two highly experienced and well-networked women independent directors on its board, Ireena Vittal and Vibha Paul Rishi, who provide valuable insights on strategic matters at board meetings. We have also ensured that all our high-level committees have women directors.

EB: Corporate governance codes and regulations are still in their infancy within India, so how difficult has it been to adapt to international best practice standards?

PC: India has a well-developed framework for corporate governance and received commendation for the quality of governance standards from researchers and market analysts in the recent past. As far as structural and regulatory changes are concerned, India has witnessed several enactments – the Companies Act, 2013 and LODR regulations, which have contributed significantly in strengthening governance norms and in increasing accountability by way of disclosures.

India has liberalised the regulatory fabric of the country to align its corporate governance norms with those of developed countries. India has adopted international best practices, but their implementation, outside of their natural context, has remained challenging. For achieving desired results, it is important that regulatory measures are based on the practices and business environment in India and should be coupled with the board and the promoters’ embracing such reforms – in form and spirit. The compliance regime has been tightened, and criminal and administrative penalties have been toughened. It can be stated that awareness of the importance of good corporate governance practices is now reasonably widespread.

Global and Indian trends have shown that shareholders and investors have embraced and rewarded companies with much higher premium/valuation for implementing the best-in-class ethical and governance practices. As such, good governance is no longer a matter of choice but a lifeline for the survival and sustainable growth of  the company.

EB: To grow IHCL’s portfolio significantly you have already drawn a five-year plan. Could you summarise the strategy? 

PC: Our number one priority is to execute Aspiration 2022, the five-year business plan to make IHCL the most iconic and profitable company in the subcontinent. Our strategy is three pronged: ‘Restructure, Reengineer and Reimagine’ our portfolio to achieve eight per cent point EBIDTA margin improvement by 2022. By 2022, we are aiming to increase room inventory to more than 25,000 rooms in all categories and enhance our geographical footprint in India and key growth markets abroad.

One of the key aspects of Aspiration 2022 is reimagining our brandscape. The refreshed brandscape will enable IHCL to expand its portfolio across different customer segments with various brands to address different price points. The brand portfolio will comprise the iconic Taj hotels, which will continue to operate in the luxury segment in key gateway cities. Vivanta will be the growth driver for tier two and three cities and operate as upscale hotels for the sophisticated traveller. Ginger will have a significant presence in the IHCL portfolio and will address the company’s requirement to be present in the lean luxury segment. We have launched a new brand called SeleQtions a ‘named’ collection of hotels that are unique, one of a kind, where each hotel will have a distinctive name.

EB: Would you say Indian hospitality has made a significant global mark or there is still some way to go?

PC: IHCL has a strong international presence across some of the world’s most significant tourism markets, including London, New York, Boston, Cape Town, San Francisco and Maldives. We have received numerous global awards and accolades, which bear testimony to the fact that Indian hospitality has been making a significant mark in the global space. For instance, as per the KPMG Global Customer Experience Excellence Report, IHCL has been chosen as India’s leading brand by consumers and has been recognised as one of the ‘Top 20 Hotel Brands in the World’ by Travel + Leisure. Today, IHCL’s iconic brand Taj’ is synonymous with Indian hospitality the world over. 5 Taj hotels ranked amongst the 50 best hotels in the world by the Conde Nast Traveller US’s Readers’ Choice Awards in October 2018. Our flagship hotel, The Taj Mahal Palace, Mumbai, ranked at the top spot globally according to an evaluation by TrustYou, the world’s largest guest feedback aggregator. These awards and accolades are encouraging but the journey to become the world’s best hospitality company is ongoing.

EB: Can you elaborate on IHCL’s other global expansion plans?

PC: Internationally, we aim to target the locations that have significant customer cross over and where our brands have great visibility and acceptance. Cities with presence of a large Indian diaspora who are ambassadors of our brand would be key entry points for us to venture into newer geographies. We are excited about our expansion in the MENA region, with two hotels due to open in Dubai and our first foray into the Holy City of Makkah, Saudi Arabia. We have also signed a Taj hotel in Deira, Dubai. We will be introducing the Vivanta brand at London Heathrow. We have also signed a hotel in Kathmandu, Nepal.

Within the Indian subcontinent, we are passionate about opening up lesser-known areas to the international luxury traveller.  We have just reopened one of South Asia’s oldest historical icons – Taj Connemara after a year-long renovation. We are also looking forward to showcasing the natural beauty of Rishikesh with Taj Rishikesh Resort & Spa opening this winter. We will also open the Taj Theog Resort & Spa in Theog, Simla and Taj Aravali Resort & Spa in Udaipur in the coming months. Today we have 170 hotels, which includes 25 under development, across four continents, 12 countries and 80 locations.

EB: We understand that there is a lot of emphasis on sustainability at IHCL. Please share with us some of the things that the company does in this area.

PC: IHCL has a strong legacy of 115 years of giving back to the community as it is the very core of our existence. We have led many initiatives in sustainability and environmental stewardship. Most recently, we have begun the phasing out of single-use plastic in our luxury hotels and plastic straws across all our 145 hotels. We also opened India’s first zero single-use plastic hotel, Taj Exotica Resort & Spa in the Andamans. Various other initiatives in the areas of water conservation, renewable energy and providing sustainable livelihoods are ongoing and a way of life for our company.

About the Author:

On the 6th of November, 2017, Mr. Puneet Chhatwal joined IHCL as the Managing Director and Chief Executive Officer. He is a global professional with over three decades of leadership experience at highly-acclaimed hotel groups in Europe and North America.

Prior to this, Mr. Chhatwal was the Chief Executive Officer and Member of the Executive Board of Steigenberger Hotels AG – Deutsche Hospitality. He was also the Chief Development Officer of The Rezidor Hotel Group – Carlson Hotels Worldwide. Mr. Chhatwal is a graduate of both Delhi University and Institute of Hotel Management, Delhi. He has completed an MBA in Hospitality from ESSEC, Paris and an Advanced Management Program from INSEAD. Mr. Chhatwal has won awards including the prestigious Carlson Fellowship and was rated as one of Europe’s 20 extraordinary minds in Sales, Marketing and Technology – HSMAI European Awards 2014. He was also the First Alumni included in the ESSEC-IMHI Hall of Honor 2014.