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Power to minority shareholders 
(Wed, 9 Feb Pre-Open) 
 
When we looked for the definition of corporate governance on the internet, we came across 15 of them! Each one of them was worded very differently. However they all referred to processes to ensure transparency in an institution's operations. Unfortunately not many institutions take these processes very seriously. In fact we doubt if even the company promoters consider them as an obstacle towards furthering their financial interests.

SEBI chief Mr C. B Bhave has once again hit the nail on its head while supporting retail investors' interest. He believes that lack of transparency in companies' group operations need to be resolved at the earliest. The investor friendly regulator has sought to bring in norms for better disclosure in such affairs. That too despite being just 10 days away from his retirement from the post. And his concern is not without a strong footing.

Cases of promoters wanting to give a better deal to group companies for their vested interests have thwarted shareholders' interests several times. Take the proposal of merging Maytas Infrastructure with the erstwhile Satyam Computer for instance. The special resolution facilitating the deal was passed purely out of the promoters' and interested parties' vested interests. And this was just a month before the massive accounting fraud came to light! But the case of Maytas is not isolated. There have been several instances of conglomerates and family held businesses furthering their financial interest at the cost of minority shareholders'. The latest case being Hero group promoters buying out Honda's stake in the company at a discounted pricing.

Thus the Sebi's proposal to restrict the elbow room for promoters to ignore minority shareholders may be of long term interest to investor community. Promoters believe that such regulations could hinder M&A deals. But we believe that all stakeholders must have a say in the future plans of the businesses they own.

No doubt, the SEBI chief's latest recommendation is as noble as the earlier ones. However, its implementation is doubtful. The proposal may not find too many supporters in the government. And corporate lobbyists could ensure that the new SEBI chief finds faults with the proposal. Thus power to minority shareholders may not come anytime soon. However, they could certainly shun the stocks of companies that show no regard for their rightful opinions.

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