The Securities and Exchange Board of India has received representations from investor groups to introduce a postal ballot for shareholders. Minority shareholders have been a long-suffering lot all over the world, and India is no exception. Their problems have been compounded by the fact that institutional shareholders, that is the financial institutions, have been notable for their inertia. Recently, the restructuring of the Indian corporate sector has meant spinning off of whole lines of business for some companies, and asset sales in others. This process has taken place without small shareholders having much of a say in the matter. As a result, investors feel cheated, and are seeking ways of increasing their clout.It is easy to say, of course, that the best way out for small shareholders if they don't like management policy is to vote with their feet and exit. But there's a practical problem here. In the case of a company which recently shed practically all its assets, sellers could not unload theirstocks because the scrip hit the circuit breaker on several days after the announcement. Investors lost out not only on price but also on liquidity. These are the circumstances which have prompted talk of a postal ballot.
While the idea is appealing in theory, it is unlikely to work in practice, given the state of our postal system. Further, the scope for mischief would also be immense, since shareholders may take recourse to legal action on the pretext of not having received the ballot papers. Yet there is no doubt that there is a need for further shareholder involvement. This can be done by having investor representatives at major towns, who will be responsible for collecting responses prior to general meetings, while also creating shareholder awareness. Companies can work with such investor associations, in their own larger interest.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
