What happens when minority shareholders disagree strongly with company polic

When minority shareholders disagree strongly with company policy, they usually sell their shares and exit, fearing they will not be taken seriously. But there have been a few doughty ones who have stood up and objected strongly enough to make an impact. Some recent examples:

Graphic by Anand Sinha Research by Niti Kiran and Jyotindra Dubey

2014
Maruti Suzuki India Suzuki Motor Corp holds 56.21% share in Maruti Suzuki India Ltd (MSIL). MSIL signed a contract with a subsidiary of SMC by which the latter would build its own manufacturing unit in Gujarat and sell the cars to MSIL at a profi t, for MSIL to distribute. A number of other MSIL shareholders, including ICICI Prudential MF, Reliance MF and UTI MF, have objected claiming MSIL is getting a raw deal

IMPACT
Board has decided to seek minority shareholders' approval

2014
Essar Energy Essar Global group owns 78% of Essar Energy. It proposed buying the remaining 22% stake for $1.5 billion valuing Essar Energy at one-sixth of its listing price in 2010. Minority shareholders in Essar Energy, such as Henderson Global Investors and Standard Life, rejected the bid saying the company was being undervalued

IMPACT
Essar Energy has set up an independent committee drawn from its board of directors to reconsider its terms of purchase

2012
Coal India Ltd The government holds 90% share in Coal India Ltd (CIL). A minority shareholder, The Children Investment Fund Management (UK) Llp, accused CIL of damaging shareholder interest by its "acquiescence to interference by the Prime Minister's Offi ce" on coal prices. It has gone to court with a class action suit, claiming Rs 212,250 crore

IMPACT
Legal battle is still on

2011
Crompton Greaves Crompton Greaves is a Gautam Thapar's Avantha Group company where the promoter holds 41% of the shares. It bought an aircraft for Rs 270 crore in 2010/11, a year when its net profi t was Rs 70 crore and its cash balance stood at Rs 150 crore. Minority shareholders questioned the management's corporate governance practices

IMPACT
The company sold the jet at the price at which it was purchased

2009
Satyam Computer Ramalinga Raju, promoter and CEO of Satyam Computer Services, with 9% share, proposed buying Maytas Properties for $1.3 billion and acquiring a 51% stake in Maytas Infrastructure for $300 million, moves which could exhaust its nearly $1.2 billion cash pile. Many other shareholders objected IMPACT Legal battle is still on

IMPACT
The acquisition was called off. B. Ramalinga Raju's letter, admitting to what came to be known as the Satyam scam, came soon after

ARMING THE UNDERDOG
Reforms of the last decade that protect the rights of minority shareholders

2001
Voting by postal ballot introduced for certain types of resolutions

2010
Shareholder participation in meetings through video conferencing and other electronic means allowed

2012
E-voting made mandatory for top 500 companies listed on the NSE and the BSE

2012
The new Companies Bill passed which gives shareholders greater rights, including the right to approve certain relatedparty transactions, exit options, etc. It also allows class action suits - law suits brought by one or more individuals on behalf of a large group of shareholders who have the same complaint against a company