Over the last month or so, an interesting debate has surfaced that takes shareholder activism to the next level. As the Deal Professor column notes, two hedge funds have initiated proposals whereby they have promised to pay their nominees, if elected to the board of the investee company, director compensation linked to the profitability of the company as if they were executives. The promised...
Theorizing Companies and Shareholder Interests
The two previous issues of the Economist magazine cover different aspects of the functioning of companies and the impact they have on shareholder value and other aspects of society. One set of issues (discussed here and here) deals with the increase in activism among shareholders. While activist shareholders are making their impact felt in companies around the world, there is a question regarding...
Budget 2013: Taxation as a Solution to a Governance Problem
A couple of months ago, we had discussed the corporate governance issues that emerge when Indian subsidiaries of multinational companies pay substantial amounts to their parents in royalty. While we will have a chance to discuss the taxation issues in the Budget in greater detail, the proposal to increase taxation on such royalty payments stands out. The Finance Minister’s speech notes: 147...
Dismissal of Suit Against Satyam Directors
Last week, there was coverage in the financial press about the dismissal of a securities law suit by a New York court against the independent directors of Satyam. Now, a copy of the order dated January 2, 2013 issued by Judge Barbara Jones of the Southern District of New York is available through D&O Diary, which also carries a detailed analysis of the opinion. The shareholder suits failed on...
SEBI’s Proposal to Overhaul Corporate Governance Norms
SEBI has issued a consultative paper that reviews corporate governance norms in India with a view to overhauling them considering developments in the Indian corporate sector over the last few years. The paper is quite detailed and is expected to generate a great amount of discussion, which would be considered by is SEBI before implementing any revised norms. Suggestions are due on the...
Royalty Payments and Corporate Governance
In the past, the corporate governance discourse pertaining to Indian companies has revolved substantially around family owned businesses and government-owned (public sector) companies. Another type of companies that is quite prevalent in the corporate scenario, but usually does not receive specific attention, is Indian listed subsidiaries of multinational companies (MNCs). A significant...
Short Sellers, Short-Termism and Corporate Governance
I have been following a corporate battle that erupted last month in Singapore. Muddy Waters, a financial research firm based in the US, released a 133-page report on Olam International, a Singapore-based company, alleging several accounting flaws in the company’s financial statements that did not represent the true state of its financial health. Upon this announcement, the price of Olam’s shares...
Indemnity clauses and criminal proceedings
Earlier this week, the Court of Appeal decided another interesting case involving contractual interpretation – this time interpreting and determining the scope of an indemnity clause. The case was one of the many fall-outs of the ongoing News of the World (“NOTW”) saga, and involved a claim brought by Mr Coulson, former editor of NOTW, against his former employers. On the termination of Mr...
Paper on Shareholder Activism
Two years ago, any talk of shareholder activism in India would be brushed aside or even ridiculed. But, since then, things seem to have changed rapidly. The last couple of years have witnessed shareholders in Indian companies becoming more active and assertive. This space has also seen the proliferation of proxy advisory firms and other corporate governance intermediaries that have aided such...
Executive Compensation and Corporate Governance
Although the issue of executive compensation has not been as dominant in the corporate governance discourse in India as it has been in other leading economies, it has begun to attract significant attention lately. While we have not had a chance on this Blog to touch upon the recent debates, it would be useful to refer our readers to a couple of posts (here and here) by Professor Balasubramanian...
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