Who hears the shareholder?

Leave it to the shareholders, which is what some people say, implying that shareholders can decide whether the CEO of a company is getting a “vulgar” salary that needs to be slashed.
But what powers does the shareholder have when most of the promoters own 40 per cent and more of their company in one way or another and the institutional representatives are silent observers and independent directors are hardly so!

Owner in name only

The shareholder is the owner of the company in name only and on that one day of the year, namely the annual general meeting..
He gets to have his say for three minutes and then is given a cold drink against a coupon and wafers.
That’s it. If he is a shareholder activist like Dinesh Lakhani a shareholder who studies balance sheets meticulously it’s difficult to say what he has about a 100-page annual report in three minutes. And then mostly chamchas of the company come and waste time singing the companies praises in poems, couplets and shairies.
A serious shareholder has to have the grit to last out.

Crores despite losses

The minister for corporate affairs Salman Khurshid has really opened a Pandora’s Box. But it is a subject that badly needs to be thrashed out. It is not that it has not been dealt with earlier but it needs to be dealt with again and again because companies find various loopholes to get round the rules and regulations.
Besides there are 8,000 listed companies and no one knows what is happening in them.
A lot of them are defaulters and are making losses but the owners and their families continue to get hefty remunerations.
Mr Virendra Jain of Midas Touch Investors Association cites the example of the Escorts chief taking home Rs 3-4 crore even though the company has been making losses and the shareholders got no dividend last year.
In the case of Great Eastern Shipping for instance a shareholder Z. Jehangir wrote to the company protesting that it had cut the dividend by 50 per cent from Rs 16 to Rs 8, but the family members including sons, wives and daughters continued to take home hefty remunerations. He wanted to know why they did not cut their perks etc by 50 per cent. Who will listen to Jehangir?

The Esop story

While CEO salaries is a very tricky issue the bottom line is that the dividend is given only after all the expenses are deducted and these include the crores taken as perks by the CEO, executives and directors both dependent and independent!
Mr Khurshid will also have to look into the employees share options (Esops) where chairmen and directors make crores when they sell these Esop shares. They get it at par value and sell it at market value and make crores.
Even though Sebi has amended the rules for Esops, the system continues to favour the top bosses.
As Mr Lakhani says the concept was taken from the West and has been turned into daylight robbery.He says leaving the decision to the shareholders is an eyewash as there is neither shareholders nor corporate democracy. In our country he says we have good, bad and unscrupulous promoters. The one proxy of the promoters makes a mockery of the shareholders’ numbers. For many of the listed finance companies for instance, he points out, their main business is in subsidiaries and at least a dozen or two dozen employees draw between Rs 2-3 crore annually.
The main company shows losses to the shareholders.