Minority shareholders are in a fighting mood. A few months ago, The Children Investment Fund (TCI) took the Coal India management to task for kowtowing to government babus on matters like pricing and fuel supply agreements.
But now activism is being ignited on many fronts, by many players. Institutional Investor Advisory Services India Ltd (IIAS), which advices institutions on corporate issues, has advised shareholders of Infosys, which held its annual general meeting on Saturday (9 June), to vote against a resolution seeking the reappointment of its statutory auditors BSR & Co.
According to a Business Standard report, IIAS has recommended that an auditor should be rotated every six years to ensure transparency. But BSR and Co had been “Infosys’ statutory auditor for 14 years and the audit partner has been the signing partner for six years”. Earlier not many eyebrows were raised over the reappointment of auditors. But after the Satyam scam, in which the auditors played a major part in the cover-up or turned a blind eye to hanky-panky, there has been increased focus on the independence of these players, the report said.
The company’s institutional shareholders have also called for top-level changes in the management and could also push for returning the excess cash on the balance-sheet to shareholders through either a higher dividend payout or a buyback offer. The IIAS report has also expressed reservations over one of the independent directors — Omkar Goswami — having stayed on the board for 12 years.
Investors, foreign and local, agree that heightened levels of shareholder activism could yield results. Foreign institutional investors (FII) circles in India too have begun to ask blunt questions about governance issues in listed public sector units (PSUs). Firstpost had earlier said that there are at least nine other public-sector undertakings — from ONGC and oil marketing companies to MTNL and LIC — whose shareholders should take their boards and the government of India as promoter to task for lack of corporate governance.
And now some minority shareholders of Satyam Computer Services have protested against the share swap ratio they were offered in the proposed merger with Tech Mahindra. Participating in the special annual general meeting convened by the Andhra Pradesh High Court on Friday, retail investors felt that they should have waited till 2014 so that the company’s performance turned positive, improving the share value.
Last year, when the Munjal family-led Hero Group and Japan’s Honda Motor formally announced the end of their 26-year-old joint venture, various shareholders had raised questions about the lack of clarity over royalty payments and corporate governance issues. IIAS also came out with a report criticising Piramal Healthcare for its lack of transparency in its deal to sell its formulations business to Abbott of USA which did not focus on the tax outgo.
Despite these straws in the wind, shareholder activism for better corporate governance is woefully absent in India. They prefer to stay silent rather than raise issues uncomfortable to the management and the promoters. But things might just change this year. In an attempt to strengthen transparency in India Inc, the corporate affairs ministry (MCA) is set to come out with a specific policy relating to corporate governance. Once the policy takes shape, MCA is likely to take Cabinet approval on the matter this year.