Why Reliance’s investors opposed board roles for Saudi businessman and Khaitan

Newcastle United chairman and Saudi Public Investment Fund governor Yasir Al-Rumayyan during the pro-am LIV Golf Invitational tournament in London in July last year. (Reuters)
Newcastle United chairman and Saudi Public Investment Fund governor Yasir Al-Rumayyan during the pro-am LIV Golf Invitational tournament in London in July last year. (Reuters)


  • In an unprecedented voting outcome at Reliance's shareholder meeting, several prominent investors voted against the appointments of Yasir Al-Rumayyan and Haigreve Khaitan to the company's board.
  • The resolutions were passed, however, given the large promoter holding in Reliance

Bengaluru: In the three years since Reliance Industries Ltd appointed Saudi Arabian businessman Yasir Al-Rumayyan as an independent director, he’s skipped about 25% of the company’s board meetings. On Monday, about 40% of the public shareholders of India’s largest company sought to pull up Al-Rumayyan for his absence, voting against his reappointment.

A third of Reliance’s large investors also rejected the appointment of Haigreve Khaitan as an independent director, given that he’s on the board of several other companies and may not be able to devote enough time to a conglomerate with diverse interests ranging from exploration and energy to retail and telecom.

The 54-year-old Al-Rumayyan is not only the chair of Saudi Aramco, the world’s largest oil company, but also the governor of Public Investment Fund, Saudi Arabia’s sovereign wealth fund, and the owner of Newcastle United football club. Only 5% of Reliance’s large shareholders had rejected his appointment to Reliance’s board in 2021.

At Monday’s shareholder meeting, Reliance’s resolutions on Al-Rumayyan and Khaitan were passed despite significant opposition, with 50.3% promoter holding helping the proposal on Al-Rumayyan secure 84% votes in favour, and 87% for Khaitan.

Nevertheless, the dissenting voices were loud enough for two proxy advisory firms and two investors in Reliance Industries to term the voting outcome unprecedented.

“The resolutions may have been passed with a majority. Still, this kind of pushback from investors is a lesson for all promoter-owned companies that you cannot take your shareholders for granted," said an executive at one of those proxy advisory firms, speaking on condition of anonymity.

Reliance Industries’s 14-member board comprises chair Mukesh Ambani, his three children, Akash, Isha and Anant, and his nephew Hital Meswani. 

Industry experts also point to potential conflicts of interest in the appointments of Al-Rumayyan and Khaitan to the Reliance board.

“Yasir Al-Rumayyan is the chair of Saudi Arabia’s sovereign wealth fund, which has invested 2% in Reliance Retail, and, therefore, (that) does not make him an independent director," said Sharmila Gopinath, a specialist adviser for India at the Asian Corporate Governance Association. 

“And in the case of Haigreve Khaitan, his firm Khaitan & Co. provides legal services to Reliance and he is also on the board of more than seven companies, which goes against the law," Gopinath said.

Reliance did not reply to an email seeking comment on the development. A spokesperson for Aramco is yet to reply to an emailed questionnaire from Mint. An email sent to Khaitan seeking comment went unanswered.

The absent director

Shareholders at other large Indian companies have also been voicing their displeasure in recent times, such as when Wipro sought to award former chief executive Thierry Delaporte a 36 crore cash severance last month.

In June, shareholders of Dish TV India Ltd rejected the candidature of two independent directors, bringing the number of directors booted out by them to 18 since September 2021. Nestle India’s shareholders recently rejected the company’s proposal to increase royalty payouts to its Swiss parent.

At Reliance’s latest shareholder meeting, at least 10 large foreign institutional investors, including the world’s largest sovereign fund and the UK’s largest fund manager, opposed Al-Rumayyan’s reappointment, show documents reviewed by Mint.

About 91% of public investors, who own 38% of Reliance, exercised their vote, while only a fifth of retail and non-institutional shareholders, who own about 13% in the company, participated. 

“Board members should devote sufficient time to fulfill their responsibilities effectively," reasoned Norway-based Norges Bank Investment Management, the world’s biggest sovereign wealth fund, managing $1.63 trillion of assets as of 31 March. 

“The chairperson is responsible for leading all aspects of the board’s work and should devote a significant amount of time to fulfill his or her responsibilities effectively. Board members should contribute to effective discussions and decision-making by attending all meetings," said Norges, which owns 0.85% of Reliance, making it the fifth-largest public shareholder in the company.

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The UK’s largest fund manager, Legal & General Investment Management, said it voted against Al-Rumayyan’s reappointment owing to “the director’s level of attendance at board and committee meetings and therefore their ability to provide oversight for shareholders."

British Columbia Investment Management Corp. said it was voting against Al-Rumayyan “for missing more than 25% of scheduled meetings without disclosing a satisfactory reason". The Canadian pension fund manages $200 billion in assets.

The Canada Pension Plan Investment Board, which oversees $460 billion in assets; the California Public Employees’ Retirement System, which manages about $500 billion in assets; and The City of New York Trust, with about $200 billion in assets under management, also voted against Al-Rumayyan’s reappointment.

Conflict of interest

The UK fund manager Legal & General Investment Management also noted Al-Rumayyan’s role as the governor of Saudi Arabia’s Public Investment Fund, which, it pointed out, “has economic interest up to 2% or higher in (Reliance’s) material subsidiaries. Therefore, he has been re-classified as non-independent given the potential conflict of interest."

In November 2020, the Public Investment Fund invested $1.3 billion to acquire a 2% stake in Reliance Retail, Reliance’s privately held retail business.

As for Khaitan, LGIM, which manages $1.5 trillion of assets, noted that as he is a partner at law firm Khaitan & Co. that renders professional services to Reliance, “such transactions may compromise (the) director’s ability to impartially and independently scrutinize board decisions".

Khaitan is an independent director of at least eight companies, including Ceat Ltd, JSW Steel Ltd, Mahindra and Mahindra Ltd, Tech Mahindra Ltd, and Dalmia Bharat Ltd.

Norway’s Nordea Bank had a similar reason for rejecting the candidature of both Al-Rumayyan and Khaitan: “We do not support the proposal as it is not in line with our expectations on good corporate governance."

Nordea Asset Management, the investment arm of the Nordic region’s largest bank, having $400 billion in assets under management, also opposed the resolutions.

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