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Equalizer for equity

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Perhaps Sebi’s proposal will help arouse wider interest. But first, all holders of a firm’s stock must see themselves as owners.

The Securities and Exchange Board of India (Sebi) has proposed a “dual approval" structure for c, by which their appointment, as well as dismissal, would require the nod not just of shareholders as a collective, as is currently the case, but also of a “majority of minority shareholders".

The Securities and Exchange Board of India (Sebi) has proposed a “dual approval" structure for c, by which their appointment, as well as dismissal, would require the nod not just of shareholders as a collective, as is currently the case, but also of a “majority of minority shareholders".

As voting on most resolutions tends to go the way that promoters or managements want, the idea of a sub-vote is to shield independent directors, who are supposed to represent the interests of minority shareholders, from overbearing business bigwigs who may see their efforts to ensure good corporate governance as much too pesky. This way, Sebi hopes, owners of thin slices of equity will get a robust voice in boardrooms. Past moves to do this did not get too far. This is largely because such shareholders rarely participate in company affairs (for which the liability they bear is little). Few bother to cast their votes, though e-voting was enabled years ago. Standards of board oversight will improve only once shareholder democracy matures. Perhaps Sebi’s proposal will help arouse wider interest. But first, all holders of a firm’s stock must see themselves as owners.

As voting on most resolutions tends to go the way that promoters or managements want, the idea of a sub-vote is to shield independent directors, who are supposed to represent the interests of minority shareholders, from overbearing business bigwigs who may see their efforts to ensure good corporate governance as much too pesky. This way, Sebi hopes, owners of thin slices of equity will get a robust voice in boardrooms. Past moves to do this did not get too far. This is largely because such shareholders rarely participate in company affairs (for which the liability they bear is little). Few bother to cast their votes, though e-voting was enabled years ago. Standards of board oversight will improve only once shareholder democracy matures. Perhaps Sebi’s proposal will help arouse wider interest. But first, all holders of a firm’s stock must see themselves as owners.

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