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Shareholder rights
There have, of late, been several instances of shareholders agitating at annual general meetings. Poor financial results by companies, and the consequent non-payment of dividends has resulted in shareholders expressing their ire at managements.In some cases, this has led to managements retaliating, sometimes by hiring goons to intimidate shareholders. Does all this herald a new awareness by shareholders of their rights? That is unlikely, given the fact that some shareholders have been agitated for something as trivial as gifts at AGMs. More importantly, even if minority shareholders do feel that the management should have performed better, there is not much that they can do about it, unless they are supported by the institutional shareholders. So far, however, institutional shareholders have displayed remarkable restraint, and have in fact not generally been on the side of the minority interests. Nor should they necessarily support minority shareholders, because interfering in an ad-hoc manner with
management decisions may well prove counterproductive for the financial institutions. FIs have a long-term interest in the future of a company, and here their interests may well coincide with those of the management, and not paying dividends in a bad year may not necessarily be frowned upon. What needs to be done is for managements to strengthen company boards, so that outside opinion is represented, and FI nominees can initiate action in this regard. For too long now have FI nominees played the role of sleeping partner, despite often holding the largest stake in several companies. Studies in the US have proved that investors are willing to pay a premium for stock of well-governed companies. A bit of investment in corporate governance by both managements and FIs will fetch good returns.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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