Advisory firms also claim victory in Maruti unit case

Maruti Suzuki has won shareholder approval to source cars from a Gujarat plant to be built by parent Suzuki Motor Corp. Maruti received 89.8 per cent of minority shareholders’ votes in its favour, Chairman R C Bhargava said.

Nearly two years ago, minority shareholders had opposed the original Gujarat plant plan saying Maruti would not benefit. Ever since, this issue has become an example of minority shareholders’ empowerment.

Even though Thursday’s decision is largely in favour of the management’s stance, the fact that minority shareholders could not only hold the decision for so long but also present their case and make “positive change” in the proposal is being seen as a step in the right direction. To its credit, the company board also engaged with all the investors to reach a decision which was acceptable to nearly 90 per cent minority shareholders.

“We believe this transaction has been pivotal in defining shareholder engagement in India, and hopefully a bellwether of the times to come,” said Amit Tandon, founder and managing director, Institutional Investor Advisory Services, a proxy advisory firm that was leading the opposition from the front.

“This has made them (companies) more considerate in their approach to investor engagement. This reaction, the changing regulatory landscape that empowers shareholders, and shareholders’ awakening to their power, can only be good for the market at large, and for the investment climate in India,” Tandon added. In a note, his firm expressed hope that companies will learn from the episode and a more minority shareholder-friendly landscape will emerge soon.

Sriram Subramanian of InGovern, another proxy advisory, said, “It is heartening to see the institutional investors taking active participation in company decisions and forcing management to address issues… The management should engage with shareholders that have not voted in favour as there would be special resolutions in future that would need their nod.”

The shareholders approved the move with 89.75 per cent vote through a postal ballot that took place between November 16 and December 15. “Out of the total votes cast by the minority shareholders, 89.75 per cent voted in favour while 10.25 per cent voted against the resolution,” Bhargava said.

J N Gupta, founder of SES proxy advisors, said the case sets a healthy precedent. “This indeed sets a benchmark for shareholder engagement as the company, after initial reservations, agreed to make positive changes,” he said.