2. 1
Roster
Why Shareholder activism
Objectives of Shareholder activism
What Shareholder Activism Can Do?
Global Phenomena
India – recent trends
Evolving eco system
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3. 2
Why Shareholder Activism
Minority shareholders are not protected
Expropriation of minority shareholders
No independent director and auditor
Lack of monitoring function in the company
Agency problem & moral hazard of management
Shareholder’s value is ignored
Controlling shareholder or managements are involved in self-dealing
Nepotism in the management
Weak enforcement of laws & regulations
Laws are sleeping in the book
Market monitoring function is weak
Institutional investors are passive due to conflict of interest
Government can not do everything
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4. 3
Why Shareholder Activism
Poor Corporate Governance Practices
Company assets are siphoned for the family
Illegal or unfair related party transactions
Cross debt guarantee, hidden debt
Sales and purchases among affiliated companies
Financial subsidies for related parties: Loan
No Transparency & No Accountability
Disclosures and auditor’s reports are not credible
Controlling family and management are not accounted for mis-
management
Poor corporate governance creates corruptions
Improving corporate governance is one of effective way to fight against
corruption in the society
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5. 4
Objectives of Shareholder Activism
Independent Watchdog on the Management
Protect Shareholder’s Value
Stop profit-siphoning management practice
Stop subsidies to affiliated companies
Stop illegal intra-group transactions
Ensure Transparency & Accountability
Independent management from controlling shareholder
Outside directors representing minority shareholders
Fights against Corruptions
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7. 6
What Shareholder Activism Can Do?
Monitoring and reporting corporate activities
Constructive talks with management before taking actions
Exercise shareholder rights
Attending shareholder meetings
Proposing agenda at the shareholders meetings
Electing directors
Proposing outside director candidate
Proxy fights
Taking legal actions
Filing civil lawsuit: Derivative actions, Class-Actions
Filing criminal investigation
Proposing and lobbying for legislation
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8. 7
Global Phenomena
Cognizant, minority shareholders in dispute over
Board
Los Angeles County Employee Retirement
Association or Lacera - to make it mandatory for all
board directors to be elected annually
John Chevedden has forced Cognizant to introduce a
proposal to empower investors with significant
ownership to call for a special shareholder meeting
Shareholders reject Citi CEO Vikram Pandit’s $ 15
million compensation package in non-binding vote.
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9. 8
Indian scenario
Coal India Vs. The Children’s Investment Fund.
Merger of Sesa Goa and Sterilite Industries.
Akzo Nobel India – Merger of 3 unlisted firms of
Promoters.
Veritas, Candian research firm raised corporate
governance issues and accounting practices at
Reliance Industries, Reliance
Communications, Kingfisher and most recently DLF.
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10. 9
Evolving eco system
SEBI mandated AMCs to disclose their general
policies and procedures for exercising the voting
rights in respect of shares held by them.
Emergence of Proxy Voting Advisory Firms
Institutional Investors Advisory Service (IIAS)
InGovern Research Services
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11. 10
Role of proxy voting advisory firms
Vote Recommendations
Corporate Governance Research and Scorecards
CG Consulting and Education
Risk Monitoring
Directors’ and Executive Compensation Analysis.
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12. 11
Proxy firms – recent recommendations
Fortis Health Care
Hexaware
Divis Laboratories
Rain Commodities
Piramal Healthcare
ACC
Gammon India
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