Strengthening the minority shareholder

Today’s business climate has amplified more than ever the importance of reliable corporate compliance initiatives. The recent scandal of the Satyam-Maytas deal appears to be a resounding slap in the face of corporate governance and has intensified the focus of governmental regulators and the inspection of public stakeholders to the core issues affecting governance in the corporate sector.

Ironically, in the recent scandal of Satyam Computer Services, the promoters, who were minority shareholders themselves, holding a less than 10% stake in the company, influenced the majority shareholders to go ahead with the deal to buyout Maytas Properties and take a 51% stake in Maytas Infrastructure for a collective amount in the range of US$1.6 billion, without the approval of the other minority shareholders. However, this appears to be a rare case since minority shareholders are typically sidelined.

In India, where management and ownership are generally unseparated, the effective control of the management or the board is questionable.

Priti Suri is the proprietor of PSA and Pooja Yadava is an associate at the firm.