One had imagined that with the loosening of controls by the omni-potent Indian government, corporate India would initiate bold measures to embrace corporate democracy. The government's decisions to allow companies to buy back their own shares and issue non-voting shares were radical in the Indian context where transparency has always been at a premium.But nothing of the sort has transpired. Only 50 odd companies have passed enabling resolutions to buy back their stock and only a handful among them have actually gone the distance by putting aside earmarked funds for this purpose from their reserves. The remaining 7000 or so listed companies have shown no inclination to put their money where their loud mouths are. Most promoters continue to blame the central government for their woes when in reality, they have enjoyed the fruits of protection for almost 45 years and cared very little, if at all, for the shareholders. Alongside, customer service and research have also been neglected all these years.
Thetruth is that most Indian issuers look at investors only during bull markets (which are short-lived anyway) and totally ignore them during slack periods (which tend to last longer -- alas!). They think that they have performed their job if results are published and annual reports sent out.
Never mind if the results are well behind schedule and the annual reports are abridged, if not camouflaged. Investor relations is a sadly neglected function and probably ments the attention of a junior officer reporting to the company secretary. This incumbent usually logs the number of investor complaints received and those resolved absolutely mechanically more for the purpose of Sebi reporting than anything else. There is just no effort to take shareholders into confidence and share the truth. Jain Irrigation is, of course an honourable exception with the group chairman publicly apologising for his misadventures with public money. Another 6,900 chairmen should have followed suit but as I said, who is really afraid ofthe shareholder? This utter disregard for the shareholder stems from years of rigid control during which time, only the favoured few of the babus could lay their hands on artificially depressed stocks and thereafter make a killing on the bourses post-listing. The issuer-shareholder relationship was more of a benefactor-beneficiary kind wherein the latter owed his or her prosperity to the former.
Free pricing of shares after the abolition of CCI has turned all earlier equations on their heads. Promoters, earlier denied the opportunity of fetching official premium on their newly issued stock begun to taste blood by pricing their new issuances on the basis of the turbo-charged impact that share premium would have on the company's bottom-line. Manufacturing activities took a backseat in the aftermath of free pricing. In fact, manufacturing firms were inseparable from finance companies in terms of their business focus. A leading consumer electronics group was buying more equity and real estate than PCBs andcolour tubes and their "group advisor" was making the kind of noises and gestures that mega fund managers tend to make. A senior official of Capital International recently remarked that Indian corporates are short on ethics and values. He is certainly not the first investment professional to have felt that way. Nor is he going to be the last. In a situation where promoter funding is a function of inflated project costs, ehtics will always be consigned to the shredder. This is really the crux of corporate misgovernance in India. Whereas promoters fund their own contribution through kickbacks on project-related items, minority shareholders pay for their shares in hard-earned cash. The banks know this, so do the institutions. In fact, they are collaborators in this institutionalised fraud. Managements have realised that stage-managing AGMs/EGMs in inaccessible areas is a sure recipe for stock-battering. The activist attitude of minority shareholders of Ciba Geigy, Sandoz and Indofrench Biotech have also sentshivers through the local promoting fraternity. The shareholder is finally getting noticed. But he is still to be feared.
But fear will set in once our promoting fraternity realise that the government can no longer shelter private enterprise from the shocks of the international marketplace nor can it provide contracts to favoured industrialists, companies will now have to conform to globally accepted business practices particularly in terms of transparency in financial reporting and investor services, quantum growth can only be fuelled by foreign capital which is no respecter of domestic political clout and customers will no longer be loyal or captive in an era of multiple choices. Ditto for shareholders and employees.
The investor has now come to expect more from managements. Some of his very basic needs are a dedicated investor services unit with benchmarks for each service. Companies that take more than 30 days to transfer shares will go at discounts, prompt pay-out of dividend, if declared. Pathejasof the world please take note!, adequate notice for AGM/EGM. Strange venues ruled out totally, accelerated announcement of half-yearly and full-year results. In fact, quarterly results preferred, and progressive disclosures in annual reports with a conscious move towards consolidation and comprehensive reporting on subsidiaries.
