India’s promoter capitalism gets a timely bashing

India's shareholder uprisings come at a good time. The country's biggest conglomerate, a leading broadcaster and a mortgage lender – all dominated by powerful backers often known as promoters – face boardroom backlashes.

Even if the revolts are quelled, they underscore a welcome shift toward more market-friendly forces.

For one thing, the proxy advisory firms relied upon by investors for guidance on corporate governance are being heard. Mukesh Ambani's $230 billion Reliance Industries  felt compelled last week to defend appointing Saudi Aramco Chairman Yasir Al-Rumayyan as an independent director after Glass Lewis urged rejection. It's a bizarrely timed nomination from a company trying to sell a chunk of its oil-to-chemicals business to the Middle Eastern giant. The Ambani family's majority ownership ensures a favourable outcome, but a significant protest vote would be an embarrassing rebuke.

Local outfits are making their mark too. Buyout firm Carlyle's bid to take control of PNB Housing Finance remains on ice after Mumbai-based Stakeholders Empowerment Services wrote a withering appraisal of the deal. It noted that funds were being raised in a way that limit the government's dilution and was unfair to minority investors.

Such critiques are also emboldening shareholders. After India's Institutional Investment Advisory Services recommended voting against the reappointment of boss Punit Goenka to Zee Entertainment's board at the 2020 annual meeting, top owner Invesco is asserting its legal right to call for a special meeting to oust him. That might stop the broadcaster from ramming through a sale to Sony.

The momentum builds on official efforts to improve India's corporate culture. New rules will soon require 75% shareholder approval for board appointments, up from a simple majority. Creditors also have used a strict insolvency code introduced by Prime Minister Narendra Modi's government in 2016 to send serial debt defaulters packing: Tycoons have been stripped of crown jewels, including at Essar Steel.

Forcing change at companies where promoters retain equity control is an uphill battle. Any progress will be timely, though. First-time investors are piling into the local stock market, which is trading at a record high. They may help keep the resistance going.

CONTEXT NEWS

- India's National Company Law Tribunal on Oct. 5 asked Zee Entertainment to file a reply by Oct. 7 on top owner Invesco's plea seeking a legal order for an extraordinary general meeting.

- India's Reliance Industries on Sept. 29 defended its decision to appoint Yasir Al-Rumayyan, chairman of Saudi Aramco, as an independent director to its board. The California State Teachers' Retirement System pension fund has decided to vote against the him based on US proxy advisory research firm Glass Lewis' recommendation, BloombergQuint reported on Sept. 24.