The interview has been edited for brevity and clarity.
What is your take on the Zee-Invesco tussle?
I am a great believer in good corporate governance. But a lot of shareholder activism is happening for its own sake. There is no thought to it. This whole Invesco episode – here is a company that is doing well, it’s a very profitable company. It has been a success story and taken the number-2 position in the media and entertainment world. And if you want to dislodge the management, you need to give reasons behind it. You cannot just say ‘I want to change the board for the sake of changing the board’.
Even if you look at the six directors (recommended by Invesco), if there were some great names, it would have been all right. But most of them are unknown names, which is not something that inspires confidence, per se. I think there is more to it than what meets the eye.
Dividend and share price have also been reasons for shareholder activism. Zee shares had dipped to half the price at which Invesco invested.
Share prices go up and down for various reasons. If that is the case, then they should say what is the reason behind it. Is it misgovernance? Is it due to poor management? If you look at Star, it hasn’t shown a profit for a long time. The media industry is such. Ultimately the management has to be looked at how they have done in terms of TRP; how have their programs done; what is the quality of the management; is their vision for the future or not? And in Zee, I find all these characteristics there in a positive way, at least today. Of course, there have been some issues in the past. But today it is being run extremely professionally. And maybe there are things that I don’t know but Invesco knows, and they should be open and transparent about it. As bystanders in the corporate world, we don’t want any battle. It’s not good for the morale of corporate India.
The same investor community that is going against Zee has appreciated your RPG group and share prices are at an all-time high. So don’t you think these fears are misplaced?
The reasons behind why people respect RPG are – number one – we are somewhat conservative. We are not sitting on a debt mountain. Second is we have strong corporate governance. Third is we do not seek political favours. And we concentrate on our core businesses and that’s what matters to us. And it is only Invesco, not others (shareholders in general) who are fighting.
Some people say that one reason for the tussle could be that as promoters they own less than 5% of the company.
That shouldn’t matter. Whether you own 0.5% or 55%, how does it matter as long as they are running the company well? Mr Naik ran L&T without any real shareholding with an iron fist. So did Yogi Deveshwar run ITC. And they ran the companies well. And that’s what should matter, right? It is incidental that the MD (of Zee) is a promoter. If he is running the company well, he should continue.
Is your objection specifically to Invesco or to shareholder activism in general?
I believe that activism is good. Corporate activism that leads to good corporate governance is good. But when you have formulas, like anybody over 75 or 70, or who’s been on the board for more than 10 years has to go (I am against that). My belief is that there should be some thought to it. When you vote against a person like Deepak Parekh, who brings so much value to an organisation and who is mentally so agile, and then you don’t vote against a young guy who is incapable because he is in the right age bracket, that’s where I have an issue. You have presidents who are 78 years old and running a country (Joe Biden, USA). You have to use discretion.
But proxy advisory firms who are driving a lot of activism cannot use discretion and have to rely on formulae to remain impartial.
I don’t know. To me it just doesn’t make sense that it is all right to have an idiot who’s 40 years on the board and somebody who’s very intelligent at the age of 75 you ask them to go. And why a person who’s spent 15 years in the company is beholden to the company. I think there are independent directors who are beholden to the company right from day one. And there are people who have been on the board for 15 years and are not beholden to the management.
How do you look at the role of proxy advisory firms?
I think it has done a lot of positive for the corporate world. But as I said, you can’t have a cookie-cutter formula.
There also has been the recent instance of shareholders rejecting the reappointment of Siddhartha Lal to the board of Eicher Motors because of the raise in his remuneration.
To me it was absolutely wrong. And he was getting a salary increase of how much, 10-11%? I remember you all (ET) did a survey that this year the salary increases are between 8% and 12%. And then he got an 11% increase. Just to say that why did he get 11% increase, it is going beyond reason. In 90% of the cases, I agree with them (proxy advisors) but there is that 10% which leaves a sour taste in the mouth.
Should the salary increase of the MD not depend on the profits of the company and how much raise other employees get?
No. I don’t think so. It should depend on how much you contribute to the company. The management knows best how much the MD is contributing. I know very well how much our MDs contribute compared to, say, a senior manager. So, I think it’s wrong to have a formula based on the median (salary increase).
Would you be opportunistic during these times?
Of course. We are looking at acquisition possibilities. We’ve just acquired a company last month in the infrastructure sector called Sparsh. And we are continuously looking at acquisition possibilities, but in our adjacencies or in businesses we want to get into. For example, if there is a stressed textile mill, I will not get into it.
