Larsen & Toubro to split chairman role, appoints managing director

Larsen & Toubro, the engineering giant, has decided to take away executive powers from the chairman of the company. 

A M Naik, the chairman, announced on Friday that the company will appoint K Venkataramanan as the CEO and MD.

Venkataraman is a L&T veteran and has been with the company since 1969.

Here are things you should know:

* The chairman of Larsen & Toubro was a powerful position and an aspiration for every engineering graduate from sixties through to eighties.

* L&T was founded in Bombay (Mumbai) in 1938 by two Danish engineers, Henning Holck-Larsen and Soren Kristian Toubro. Both of them were strongly committed to developing India's engineering capabilities to meet the demands of industry.

* Holck Larsen retired as Chairman in 1978. Since then the company was led by professionals like N M Desai, S R Subramaniam, U V Rao, S D Kulkarni and more recently A M Naik.

* The chairman of the company was usually an engineer and going forward, it appears that will remain the same.

However, things have changed over the years. The company has over 50 businesses spanning engineering and construction, financial services to IT services. Demands for management bandwidth have changed and the engineer at the helm needs to be good in finance as well as services besides machine tools and concrete. Hence, the split role could work better.

* L&T shares jumped 4.7 per cent outperforming the broader market indicating the stock market support. There was a persistent demand from institutional investors for an overhaul of the top management structure. L&T’s has a market cap of Rs 79,321 crore.

* The management had engaged external consultants for the purpose. In 2009, the company appointed consulting Mckinsey and Bain Consulting to chalk out a succession plan for A M Naik who retires in September 2012.