The principal change agent in the regulatory framework for better corporate governance — the Companies Bill 2011 — with all its modifications is awaiting passage in Parliament this winter session.
But that did not deter minority shareholders in 2012. They were most aggressive in protecting their rights this year. Consider this: 60.36 per cent of valid votes of non-institutional shareholders voted against the merger of Satyam Computer and Mahindra Satyam, points out the proxy advisory and research services organisation InGovern.
TCI’s crusade
UK-based hedge fund TCI in its ‘crusade’ eventually filed a case in August against Coal India’s Board for its rollback of price increase under Government directive.
There were many for such examples; more than 20 per cent valid shareholders’ votes in Sesa Goa went against the merger of Sterlite and other unlisted entities of the Vedanta Group, ONGC Board decided to evaluate performance of its independent directors and Jindal Steel and Power voluntarily made some changes regarding its MD’s position.
U.R. Bhatt, MD, Dalton Capital Advisors India, told Business Line that in India changes have been seen to be gaining momentum this year. “Here we have companies with best of governance practices and worst too.
Apart from changes in the law, professional approach in adopting the spirit is slowly gaining ground. At the same time there are pointers that serious shareholders’ activism is also taking roots,” he added.
Heightened activism began ahead of enactment of shareholders right (in the prescribed class of companies) of voting through electronic mode or class action suits or the proposed code for independent directors becoming realities.
Regulatory changes
According to Shriram Subramanian and Mohan Kumar K of InGovern, Indian companies are experiencing the emergence of a corporate governance landscape substantially different from a few years ago. SEBI’s regulatory changes such as increasing public float in listed companies and mandatory requirements on institutional investors for disclosure of their voting patterns have facilitated better governance practices.
“The new Companies Bill also brings increased focus on company disclosures, mandatory requirements for constitution of independent directors, auditor rotations and other provisions for protecting minority shareholder interests,” they said.
Shareholders were more strident about listing norm violations. Nine companies among to 100 companies were found to have less than 50 per cent independent directors and had no independent Chairman on the Board.
An InGovern study found that some 18 companies forming part of Nifty and Junior Nifty indices had average tenure of independent directors of more than 9 years, a violation of a non-mandatory provision of the listing agreement. There were 22 companies where more than half of the independent directors have served on the board for more than 9 years.