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Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
Shareholder Activism
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Shareholder Activism

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  • 1. Shareholder Activism Raghu Babu G27th April 2012
  • 2. 1 Roster Why Shareholder activism Objectives of Shareholder activism What Shareholder Activism Can Do? Global Phenomena India – recent trends Evolving eco system www.rna-cs.com
  • 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 www.rna-cs.com
  • 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 www.rna-cs.com
  • 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 www.rna-cs.com
  • 6. 5  Aspects of shareholder activism • Proxy voting • Dialogue • Resolutions • Divestmentwww.rna-cs.com
  • 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 www.rna-cs.com
  • 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. www.rna-cs.com
  • 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. www.rna-cs.com
  • 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 www.rna-cs.com
  • 11. 10Role of proxy voting advisory firms  Vote Recommendations  Corporate Governance Research and Scorecards  CG Consulting and Education  Risk Monitoring  Directors’ and Executive Compensation Analysis. www.rna-cs.com
  • 12. 11Proxy firms – recent recommendations  Fortis Health Care  Hexaware  Divis Laboratories  Rain Commodities  Piramal Healthcare  ACC  Gammon India www.rna-cs.com
  • 13. 12 Thank you raghu@rna-cs.comwww.rna-cs.com

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