Quick Edit | Shareholders as activists

Quick Edit | Shareholders as activists

It was a shareholder revolt, led by a few institutional investors in Satyam Computer Services, against the proposal to merge the outsourcing firm with two real estate companies run by B. Ramalinga Raju that eventually forced the infamous scam into the open.

However, such instances of activism by large institutional investors are rare in India. The balance of power in most companies firmly rests with the promoter group, unlike in the US, where large investors (as well as independent boards) make their voice heard each time a firm is out to raise capital or seek a corporate marriage.

So it is good to see that the Securities and Exchange Board of India has, in a 15 March circular, said that “mutual funds should play an active role in ensuring better corporate governance of listed companies". The companies that own these funds will have to mandatorily disclose their voting behaviour on the websites and in their annual reports.

Mutual funds alone cannot do the trick, but this is a huge step towards better corporate governance in India.