SUCKER PUNCH

WELL LAID-OUT PLANS OF COMPANIES ARE PUMMELLED BACK TO THE DRAWING BOARD AS SHAREHOLDERS INCREASINGLY ASK UNCOMFORTABLE QUESTIONS, SETTING THE TONE FOR GREATER ACCOUNTABILITY AND TRANSPARENCY IN INDIA INC.

- ASHISH RUKHAIYAR AND KRISHNA GOPALAN

TRY THIS SMALL exercise. Pick one letter at random from the English alphabet and name a well-known publicly listed company whose name starts with it. Chances are that it would have faced shareholder activism at some point. This is neither a joke nor is it a way to test a person’s IQ. In fact, it is an indication of the times we are in and the real possibility of the issue getting extremely challenging for companies that refuse to acknowledge how seriously their lives can be affected, if it already has not.

At the core, shareholder activism is not about irate people who believe they have got a raw deal. Instead, it is about companies being told that their levels of accountability need to be so high that there is no scope for ambiguity, or to never make the mistake of taking the shareholder for granted. For instance, if the financial performance for a year has been unimpressive, a resolution placed to increase the salary of the Managing Director or CEO is like holding a red flag to a bull. This August, Eicher Motors’ MD Siddhartha Lal, the man credited with the turnaround of the company, was given the thumbs down by shareholders for a reappointment to the job with a pay hike of 10 per cent. This was when the median showed an increase of just 1 per cent. Finally, he was back but with a maximum salary cap of 1.5 per cent of profits. The message from the shareholders was stern and clear.