Proxy advisory firm SES advises investors to vote against re-appointment of Godfrey Philips promoters on the board

Godfrey Phillips executive director Samir Modi

Amidst the boardroom battle between Bina Modi, Chairman and MD of Godfrey Philips, and her son Samir Modi, proxy advisory firm Shareholder Empowerment Services (SES) on August 27 advised shareholders to oust all members of the promoter group from the board. The SES report comes ahead of an Annual General Meeting (AGM) scheduled for September 6.

Godfrey Phillips India has put four ordinary resolutions and two special resolutions for approval from its shareholders. SES has asked investors to vote ‘against’ the reappointment of Bina Modi and the appointment of her daughter Charu Modi as Executive Director. It also asked investors to vote ‘for’ the company’s resolution to not fill the vacancy caused by the retirement by rotation of Samir Modi.

Speaking to Moneycontrol, SES managing director JN Gupta said “personal and family battles fought through board rooms of public companies make fighting parties persona non grata in the eyes of shareholders as the very same people who they thought will add value are the cause for value erosion"

“Family members should step off the board and allow the company to function in a completely independent manner through a professional board and management. Family members can join the board after the dispute is resolved,” proxy advisory firm Ingovern's managing director Shriram Subramaniam told Moneycontrol.

Remuneration, governance concerns

The report highlighted that Samir Modi and Bina Modi account for approximately 87 percent of total board remuneration.

Additionally, only promoter-directors Samir and Bina receive profit-linked commissions, while non-promoter Executive Director Sharad Aggarwal has not received any commission or variable pay for the past three years, pointed out the SES report.

"The company has not justified this disparity," says the report. SES finds the remuneration policy favouring the promoters and recommends shareholders to seek clarification from the nomination and remuneration committee (NRC) and the Board," the report said.

Another issue highlighted in the report is the segregation of Bina Modi's position of Chairman and Managing Director. The report suggests this would maintain corporate democracy.

The proxy advisory firm also raised red flags about one of the independent directors -- Lalit Bhasin. According to SES, Bhasin has had a pecuniary (monetary) relationship with the company since he has also been offering professional services to his chartered accountancy firm for the last 20 years.

Although this situation doesn't breach legal compliance, SES in the report suggests, "the pecuniary relation will raise the question about the independence of the Director.”