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SEBI wants greater say for investors in companies
MDT/PTI 12 September 2012

Institutional investors can protect interests of minority shareholders by playing an active role in company decisions, says UK Sinha

 
New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has said institutional shareholders should have a larger say in the functioning of Indian companies to help make the voice of investors heard at the right forum, reports PTI.
 
"We would be very happy, if we had a large presence of institutional shareholders in the Indian corporates," UK Sinha, Chairman, SEBI told reporters.
 
Speaking on the sidelines of a lecture on 'Making Companies' Boards More Effective and Accountable", organised by International Management Institute (IMI), Sinha said there is a belief that the matter is not giving the regulator the comfort that is required.
 
"Voice of retail investors is not getting addressed," he said.
 
Sinha said almost 50% of shareholding in India in top companies is with promoter group, which is very high, when compared globally.
 
FII and domestic institutional investors put together are less than 25% equity in the companies, but they have less than 2-3% representation on the boards, he said.
 
"In a situation like this, majority shareholders have their way. I am quite surprised pension funds are not allowed to invest in the market. If institutional investors play a role, minority interests are protected because the institutional investors give voice to minority shareholders," he added.
 
Asked about the reports of SEBI setting up a special 'Sahara cell' to deal with the Sahara case, wherein the Supreme Court has upheld the regulator's order directing the group to refund thousands of crores collected from investors with interest, Sinha said SEBI is fully equipped with any matter related to concern of shareholders and investors.
 
"This country has enough manpower and resources," he said.
 
On SEBI's long-pending demand to grant it access to call data records to assist it in stock market manipulation cases, especially the matters of insider trading, Sinha said the regulator has been told that a decision would be taken soon in this regard by the government.
 
"We asked the government that rule should be modified to make SEBI eligible for that. It is still under consideration by the government. SEBI has been told that a decision will be reached soon," he said. .
 
Speaking about the independent directors on the company boards, Sinha said the regulator is in favour of strict norms for their selection.
 
"I am more focussed on quality of independent directors and not on the number of independent directors. Many companies in India have taken advantage of extended family norms because the definition of independent director in the country is not clear.
 
"We need strict norms for selection of independent directors," he said.
 
Listing out the areas where SEBI is working with a long- term vision, Sinha said that the companies should disclose the agenda items of their AGMs on their websites and on the stock exchanges.
 
SEBI chairman also said that PSUs and private companies are treated separately for various regulations and the regulator wants "similarly placed companies to be treated similarly." 
 
"SEBI will also work on norms that will review the performance of independent directors," Sinha said.
 
 
Comments
siddharth biswal
1 decade ago
i agree that it is not possible for MF's to vote on every resolution as it will add to the cost but MF's are silent on even promoter biased resolutions.There is a time to speak & there is a time to be silent & it should never be inter-changed.Had MF's been voting then cases like Indiabulls would have been limelight much earlier than be put forth by a foreign research house.I am ready to pay for the added cost rather than let my money be spent on dubious integrity co.Morever postal ballots or online voting can also be done if made an option by SEBI for MF's.Voting is imp because common investors don't have the expertise to analyze it.Its true proxy firms are creating all sort of noises to get noticed but its also true they wouldn't have been in the first place if MF's had been doing their job.By doing this MF's will be doing a service to all those haples investors still invested in dubious firms.Morever SEBI can always compensate MF's from investor protection fund expenses incurred for this.This will be one area where i can say idle funds best utilized.
Reply
siddharth biswal
1 decade ago
if sebi is so much concerned about retail investors then it should make it mandatory for MF's to vote for every resolution or outsource it to professional firms just like in US.While MF's are getting all the support of SEBI in maintaining their income level they are not that forward in fighting for resolutions that are customer friendly.According to one fund house they prefer to shift their investment rather than fight a resolution.I hope SEBI is listening ?
Reply
Sucheta Dalal
Replied to siddharth biswal comment 1 decade ago
We disagree. In fact SEBI has already asked mutual funds to vote on every resolution and publish their stand. This may sound good on paper but in India, it has only opened the doors to such outsourcing of proxy advice when the mutual fund industry itself is still unable to stand on its own feet and attract investors. Consequently, SEBI's order smacks of ulterior motives. Three proxy advisory firms have already sprung up to grab this opportunity. They put out their views but even blue chip companies such as Infosys and Wipro have ignored their advice regarding directors and auditors. Such toothless advice only adds to costs and will be at the cost of mutual fund investors. After all someone has to pay for the advice.
What is stranger is that SEBI's on ex- executive directors and lawyers are employed by some of these firms.
Makes us wonder whether SEBI's Executive Directors in the C B Bhave regime created job opportunities for themselves through this order.
Reply
Chandragupta Acharya
1 decade ago
Promoters should not be allowed to vote on Resolutions appointing Auditors. It is a clear case of conflict of interest
Reply
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