Hero-Honda: Split Wide Open

Abstract

The case focuses on governance issues that arise in case of joint ventures. The case is based on one of the most successful joint ventures in the history of corporate India between Honda Motor Company of Japan and the Munjal family of India. They established Hero Honda Motor Company in 1984. The company became the largest producer of motorcycles in the world. The announcement in December 2010 that Honda would sell its stakes in the joint venture to the Munjals came as a surprise to the investors. The process of the transfer including the underlying financial arrangements was not transparent as good governance would require it to be. The Japanese partner too appeared to be guilty of not following its own stated policy on transparency and equity in all business transactions. The case raises several corporate governance issues pertaining to conflict of interest, transparency with absentee shareholders, the role of independent directors on the board and the robustness of board processes. The case also raises concern about regulatory issues connected with the incident.