Shareholder Engagement Practices in Corporate India

Abstract

Till 2007, the shareholders across the world were too happy to point to the buoyant economy and stock markets. But the global financial meltdown which had hit the world economy had changed the perception of shareholders. Today, shareholders in US have realized the importance of shareholder engagement and are forcing companies to involve them in the decision making process which affects their interest and ensure corporate governance. Corporate governance can be ensured if the board member engage themselves with discussion with shareholders, consider their views, allow them to communicate and respond to their communication on the major issues such as board member selection, board member remuneration and incentives, project selection, CSR initiatives, environmental protection measures, business ethics practices, etc. This in turn will benefit all stakeholders in particular and society, economy, environment in general. Therefore, Shareholder engagement is considered as one of the great areas of corporate governance and it has been seen to be lacking particularly in India as this concept is very new to corporate India and is in nascent stage. The countries around the world are making shareholder engagement mandatory for corporate but are also framing regulations for the same. Shareholder engagement may play vital role in a emerging economy like India in preventing corporate scams like Satyam computers but also helps in bring transparency in corporate decisions and corporate governance thereby improving bottom-line. The need of the hour is that Corporate Boards should view and project themselves as shareholder stewards. But, question arises does the corporate India is viewing and projecting themselves as shareholders stewards? No research has been done to address this question. Further, no research has been done in India focusing on awareness about shareholders engagement among shareholders, shareholders engagement practices do adopted by companies, whether corporate entities exhibited interest in implementing shareholder engagement practices, what is the role of government in shareholder engagement, etc. This has motivated the researcher to take up the present study. 10 Companies with highest market turnover for the year ending March 2013 were selected for the purpose of study. The study reveals that the shareholders were unaware about the shareholder engagement concept. Further the study revealed that the sample companies have not engaged directly with shareholders in a sustained or ongoing way on matters of shareholder concern. The shareholder vote has served as a primary means of shareholder communication with the company. The corporate entities have not exhibited any interest in shareholder engagement as it is evident from the fact that not a single sample company had prepared shareholder engagement activity report. The study also reveals that SEBI is exploring possibility of developing policy/regulations for the shareholder engagement. The researcher has developed a shareholder engagement model which may be of immense help to corporate India to adopt shareholder engagement practices which in turn benefits all stakeholders in particular and economy, society and environment in general.

Keywords: Shareholder Engagement, Corporate Governance, Minority Shareholder, Corporate India

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