Six The Hindu directors want Monday's resolutions recalled
BOARD ROOM BATTLE
BS REPORTER
Chennai, 24 October
The recent change of guard at The Hindu group of publications,
wherein the family members have returned to the helm of daily
operations, is likely to get into more controversy.
Six of the 12 board members who'd opposed the move — it went through
with the chairman's casting vote — are now demanding the board recall
and cancel the resolutions passed in Monday's meeting.
In a letter dated October 23, whose subject line is ' Illegalities at
the meeting of the Board on October 21', the dissenting members have
said all actions by the chairman ( N Ram) during the meeting were "
clearly arbitrary and illegal". Asking for a reply in three days, the
letter said, " We reserve our right to initiate suitable action if the
above reasonable requests are not met." When asked, N Ram, chairman,
and N Murali, co- chairman of Kasturi & Sons Ltd ( KSL), the holding
company, said: "This is nothing new and nothing to be concerned
about." The six directors opposed to the Ram- Murali decision are
KBalaji, K Venugopal, Ramesh Rangarajan, Lakshmi Srinath, Vijaya Arun
and Akila V Iyengar. Their four- page letter says, " The impugned
resolution of October 21 be forthwith recalled and cancelled." The
letter has been sent to the other members — N Ram, NMurali, N Ravi,
Nalini Krishnan, Nirmala Lakshman and Malini Parthasarathy.
On Monday, after the KSL board meeting, Ram announced it had decided
to appoint him as chairman, N Murali as cochairman, NRavi would be
Editor- in- Chief and Malini
Parthasarathy the Editor of The Hindu.
The dissenters have said the way the board meeting was conducted was
illegal. " The draft resolution is ex- facie illegal and untenable as
roles have been unilaterally decided and assumed by each of you above
named and some roles have been allocated unilaterally to the
undersigned," the letter said.
Also, " It appears the decision to use a casting vote and ensure
illegal passage of the resolution seemed to have been taken before the
meeting commenced and you had decided to ignore the view of the rest
of the board." The letter says the casting vote was used by Ram to
place himself and his family members in positions of absolute power.
"All of these actions are clearly arbitrary and illegal." They alleged
the entire proceedings were conducted in an arbitrary, high- handed
and unilateral manner. " The holding and the manner of conducting this
meeting is also in gross violation of the provisions of the Companies
Act." The dissenting six have also said due process were not followed
in confronting the editor and chief executive officer (removed as a
result of Monday's meeting) " on various vague and baseless
allegations and accusations, to which the undersigned raised their
protest during the meeting".
The dissenting members have also alleged that the draft resolution was
prepared before the Monday meeting and not circulated to all members.
Of the removal of the editor and CEO, Ram had later spoken of "...
recurrent violation of the code of editorial values of the Hindu and
recurrent violations on the business side", for the action against
Siddharth Varadarajan ( editor) and Arun Anant ( CEO). The dissenters
have said the removal of these professionals was arbitrary and legally
indefensible.
RBI sets up advisory panel for national bill payment system
BS REPORTER
Mumbai, 24 October
The Reserve Bank of India ( RBI) has constituted an advisory group to
implement a national bill payment system enabling households to pay
utility bills, school fees and remittances using their bank accounts.
The nine- member group, headed by Umesh Bellur of the Indian Institute
of TechnologyBombay, would give its report by the end of December, RBI
said in a statement.
The panel would suggest the nature of the payment platform— either an
existing one or through a new entity— for Giro (general inter- bank
recurring order)- based bill payments. It would also form guidelines
for setting up and operating the system.
A Giro is a payment instruction from one bank account to another. It
facilitates payments through cash, cheques, credit/ debit cards and
prepaid payment instruments, transferring funds to the bank accounts
of beneficiaries. The panel would also recommend criteria to seek
authorisation for bill payments. These criteria would relate to
financial, governance, ownership, technical and operational aspects.
RBI said the panel felt a new organisation should be created on the
lines of the National Payments Corporation of India. It would also
recommend the nature of the organisation— identification of a chief
executive, location of the headquarters, membership and capital
structure, as well as contributions by stakeholders.
Now, open a bank account through Aadhaar without paperwork
NA STEP FORWARD FOR EASY BANKING N
BS REPORTER
Mumbai, 24 October
The Unique Identification Authority of India (UIDAI) has enabled a
feature that would allow anyone with an Aadhaar number to open a bank
account, without any paperwork.
Axis Bank was the first lender to start the electronic
knowyourcustomer ( e- KYC) facility, which would facilitate
Aadhaarregistered individuals to step into a branch and open an
account, merely by providing his/ her unique identification number,
after which the person's fingerprints would be scanned.
On Thursday, UIDAI chief Nandan Nilekani launched the e- KYC facility
at the Axis Bank headquarters here. Initially, the facility is
available at 1,000 branches of the bank. By the end of this month,
Axis Bank would extend the facility to about 2,000 branches.
Nilekani parried questions on extending the facility to other banks.
He said the idea was to expand the e- KYC facility, adding it was
possible to secure insurance cover and apply for mutual funds through
this. Talks are on to include pension schemes in the programme, too.
Axis Bank would connect with UIDAI through an authorised service
agent— usually, a payment gateway— which would, in turn, connect with
the UIDAI database, Nilekani said.
Shikha Sharma, managing director and chief executive of Axis Bank,
said while opening bank accounts, a key challenge for customers was
providing proof of address and identity, as well as physical copies of
documents.
She added e- KYC simplified this process and provided better customer
experience.
The facility was safer compared to the current practice of providing
photocopies of documents, Nilekani said, adding all work happened
electronically, at the back- end. " Fundamentally, all the
infrastructure is falling into place for creating a much more
electronic, a much more digital- cash kind of an economy," he said,
adding this had long- term ramifications, including making the economy
cashless.
So far, UIDAI, set up four years ago, has rolled out 460 million
Aadhaar numbers. It was targeting 600 million numbers (half the
country's population) by early next year, Nilekani said.
Ensure service providers adhere to all regulatory requirements: RBI to RRBs
The Reserve Bank of India ( RBI) has asked regional rural banks (RRBs)
to ensure the service providers ( including another bank) adhere to
all regulatory requirements. " RRBs may necessarily enter into
agreement with the service provider that the infrastructure and
applications are made available for audit / inspection by the
regulators of the country," said RBI.
File photo of a villager getting his finger print scanned at an
Aadhaar enrolment centre in Rajasthan
Life after the Companies Act
Mr X, an independent director, goes around with a long face these
days. The reason for his unhappiness is simple: The new Companies Act
has taken away certain privileges he has been enjoying for years. For
example, he has served on the boards of at least two companies for
over 20 years, but he has to let go of them since the Act has imposed
a maximum term of 10 years ( two consecutive five- year terms). He can
be eligible for reappointment only after a three- year cooling- off
period.
Mr X, of course, is not alone.
According to a study conducted by proxy advisory firm InGovern for
corporate governance structure at the country's top 100 companies as
on March 31, 2013, at least 10 independent directors have served for a
tenure of 20 years or more on company boards, while 10 others hold
such positions on boards of 10 or more companies. Some of the marquee
names are: Nusli Wadia ( 34 years as independent director on Tata
Steel board), M L Bhakta ( 28 years in Ambuja Cements), T K Balaji (27
years in Titan Industries), M L Apte ( 26 years in Grasim Industries)
and Yogendra P Trivedi ( 21 years in Reliance Industries).
Another reason for Mr X and some of his board colleagues' unhappiness
is the ban on stock options for independent directors, though the new
law allows profitrelated commission, higher fees and reimbursement of
expenses for participation in the board or other meetings.
Mr X thinks he stands to lose substantially since he won't be eligible
for stock options any more.
Consultants say this is an illogical move and it would have perhaps
been more relevant to place restrictions either on the total amount of
options or put a time limit on exercising these options.
To defend his point, Mr X cites the practice abroad where stock
options are allowed for independent directors. For example, in the UK,
such directors can hold shares up to a fixed amount. The US goes one
step forward and allows substantial shareholding since the country's
regulators do not view ownership of even a significant amount of
stock, by itself, as a bar to an independence finding.
Many in India, however, say allowing stock options for independent
directors would heavily compromise their independence since they would
develop a vested interest. India Inc seems to have a mixed view on
this. While many big companies have given generous stock options to
their independent directors ( to be fair, there is no evidence to
suggest that their independence has been curtailed because of this),
some others prohibited it. For example, in May 2008, Life Insurance
Corporation removed two of its nominee directors on the board of
Larsen & Toubro after it was found that they had got shares worth
acombined ₹ 8 crore under an employee stock option scheme.
India Inc also points out other, though smaller, problems, too. A
leading tax practitioner, who is on the boards of several Indian
companies, talks about a peculiar issue independent directors would
face, courtesy the new Act. According to the Act, such directors will
have to meet at least once a year, without the presence of executive
directors and management members to examine internal controls and
general governance practices. The tax practitioner says he is getting
hundreds of queries from mid- rung companies, all wanting to figure
out how this will work since the Act is silent on details. For
example, who will convene and preside over these meetings? Should the
independent directors take turns in convening these meetings? Is it
compulsory to keep minutes of these meetings? If yes, should the
company be asked to organise and pay for an external guy who can
maintain secrecy? The tax practitioner says these issue may seem
trivial but can be real problems for relatively smaller companies.
Bigger companies such as Infosys have solved this problem by
introducing the concept of lead independent directors who preside over
these separate meetings. This system is already prevalent in many
countries. After the Sarbanes Oxley Act was passed, the stock
exchanges in the US amended their listing rules to provide for a
compulsory meeting of independent directors separately. Nasdaq listing
rules require independent directors to have these meetings at least
twice a year. The UK Corporate Governance Code also provides for
meetings of the non- executive directors led by a senior independent
director at least annually to appraise the chairman's performance and
on such other occasions as are deemed appropriate. Many smaller Indian
companies, however, say such practices should have been implemented
gradually rather than at one go and they perceive this as yet another
bureaucratic exercise that has been thrust on them. " It's difficult
to get enough independent directors; who will give us lead independent
directors?" is the question from a CEO.
The bigger question, however, is whether the new Companies Act can
change the fundamental problem since boards historically have been a
network of influence for promoters, so family and businessmen friends
are often nominated as independent directors, leading to a cosy
relationship in which both objectivity and independence are lost. Law,
as the tax practitioner, says can hardly change people's minds.
Independent directors are not happy with some of its provisions
HUMAN FACTOR
SHYAMAL MAJUMDAR
Sebi norms for SME listing
Market regulator Securities and Exchange Board of India on Thursday
issued detailed guidelines, including on eligibility criteria, for
listing of start- ups and small and medium enterprises ( SMEs) on
stock exchanges without an Initial Public Offer.
The guidelines follow notification of new norms by Sebi earlier this
month for permitting listing of start- ups and SMEs on the
Institutional Trading Platform of SME Exchanges.
Through this new route, SMEs and start- ups would not need to make a
public offer of securities for getting listed on the stock market.
The move would help SMEs and start- ups raise capital from the
securities market during their early stages of
growth. PTI
Amul chairman may get the axe
PREMAL BALAN & RUTAM VORA
Ahmedabad/ Vadodara, 24 October
With as many as 14 of the 17 elected directors of Amul moving a no-
confidence motion against him, Chairman Vipul Chaudhary stares at a
situation similar to that faced by his predecessors, Verghese Kurien
and Parthi Bhatol, of a possible ouster.
A source familiar with the development at Gujarat Cooperative Milk
Marketing Federation (GCMMF), which markets the Amul brand and had a ₹
13,735- crore turnover in 2012- 13, informed: " A requisition meeting
of the directors will be convened on October 26 in this regard." About
the no- confidence motion, Chaudhary said " I am not aware of any such
thing", but those closely associated with the federation cited reasons
ranging from internal conflicts to political overtures.
Chaudhary had recently been seen accompanying Congress VicePresident
Rahul Gandhi during the latter's visit to Ahmedabad and many read in
this Chaudhary's aspiration to be chairman of the National Dairy
Development Board ( NDDB). This, according to sources, has led to
problems for him within the federation, where a majority of directors
are backed by the Bharatiya Janata Party ( BJP).
It is leant that his meeting with Gandhi was arranged by his mentor
and Congress leader Shankarsinh Vaghela. "The Congress has been luring
Chaudhary with the chairmanship of NDDB, which falls vacant later this
month when incumbent Amrita Patel steps down," sources said. According
to BJP members, Chaudhary, who also heads the Mehsana District
Cooperative Milk Producers' Union ( popularly known as Dudhsagar Dairy
and one of the largest member unions of GCMMF, has been Patel's rival.
This is not the first instance of a revolt at GCMMF. The previous two
chairmen, Kurien and Bhatol, had faced similar oppositions — in 2006
and 2010, respectively.
While Kurien chose to step down before a no- confidence motion against
him, Bhatol survived the notrust vote, with BJP's backing amid high
drama.
Interestingly, it was Chaudhary who had led the revolt against Bhatol.
Besides, when Shankarsinh Vaghela brought down the then BJP government
in the state in 1996- 97, Chaudhary was seen as instrumental.
Vaghela later formed a new government of the Rashtriya Janata Party (
RJP), with Congress as an ally, and Chaudhary was made the state's
home minister. But the government fell after 22 months and as Vaghela
dissolved RJP to join the Congress, Chaudhary followed him. In 2007,
Chaudhary joined BJP at a function in Mehsana and was inducted by
Chief Minister Narendra Modi.
His unopposed election as GCMMF's chairman in 2012 was seen as a
reward for his closeness to Modi. BJP members said many members of the
federation had not opposed his appointment only because he had Modi's
backing.
However, when contacted, a GCMMF board member, asking not to be named,
told Business Standard the Mehsana Union, headed by Chaudhary, had
recently made some allegations against the federation and that was
what might have irked the members and led to the no- confidence
motion. In fact, GCMMF had on October 23 sent a letter to the Mehsana
Union's vice- chairman and answered the issues raised by the union.
Turn to Page 20 >
14 of 17 board members move no- confidence motion; proximity to Rahul
Gandhi seen as trigger
The Mehsana Union, headed by Vipul Chaudhary, had recently made some
allegations against the federation and it may have irked the members,
say sources
________________________________
Click here to read more...Turn to Page 20 >
Click: Article continued from…Amul chairman
________________________________
Amul chairman may get the axe
In the letter, issued by GCMMF Managing Director R S Sodhi, the
federation took on the union over a number of issues, including big
loans availed of the latter, offering cattlefeed worth ₹ 22.50 crore
to Maharashtra farmers for free ( without taking the approval of
union's board) and selling milk powder to private players at lower
rates against the federation's advice.
The union is facing GCMMF's attack also because of constant decline in
milk procurement by it and setting up of a900,000- litres- a- day milk
processing plant. Also, the union set up a three- million- litres- a-
day milk packaging plant at Daruheda, with an investment of ₹ 300
crore.
>FROM PAGE 1
--
CS A Rengarajan
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