Punit Goenka’s decision on Monday to step down from the managing director’s position at Zee Entertainment, staying only as its CEO, is being seen in corporate circles as a smart gambit, just ahead of a crucial re-appointment vote at the company’s annual general meeting to be held next week. Corporate lawyers and proxy advisory firms that FE spoke to say that Goenka has sought to placate shareholders with the move.
“Punit Goenka is showing skin in the game by giving up the role of managing director and continuing to be CEO.” Shriram Subramanian, managing director of proxy advisory firm InGovern, said. He, however, said shareholders are likely to reject his reappointment as director and ask for a change in leadership at the AGM on November 28.
Corporate lawyers such as HP Ranina say that the Zee board will have to find a replacement to Goenka as MD in the near future. “It is a statutory position which will have to be filled. Companies have to do it within a year of the position falling vacant,” Ranina said.
Though Zee has said that the decision to give up the MD’s position was to give Goenka more time to focus on meeting the stiff targets, a corporate governance expert described Goenka’s move as “clever.” The promoter family holds 3.99% in Zee, while mutual funds, insurance companies and foreign portfolio investors hold 18.52% in Zee. Some institutional investors are said to be uncomfortable with Goenka continuing as Zee’s MD, which could have prompted his decision to relinquish the position, the expert said declining to be quoted.
Both InGovern and Institutional Investor Advisory Services (IiAS) in reports this week had recommended that shareholders reject Goenka’s reappointment as the company’s MD. The company’s board had given Goenka a fresh five-year tenure as the MD starting 1 January 2025, after his current five-year tenure ends on 31 December.
In a conversation with FE, Zee’s chairman R Gopalan said that Goenka needed to focus his attention on the enhanced targets set by the board. These targets include quarterly consolidated revenue and consolidated Ebitda outlook for the next four quarters (commencing Q3FY25) and a payout of 25% of consolidated net profits as dividend to the shareholders of the company.
“These targets are stringent and will be reviewed at the end of the current financial year (FY25). There will be a second review at the end of the first half of the next financial year (FY26). The board was of the view that Punit would need to focus his attention on the business as the competitive landscape is increasingly getting dynamic. MD responsibilities would have taken his attention away from this crucial objective,” Gopalan said.
Gopalan said that a decision on the MD’s position had not yet been taken by the board. “We want to go ahead with the CEO for now because it is important, he (Goenka) achieve the targets set. That is key,” Gopalan said.