Under fire from large institutional shareholders, Zee Entertainment's CEO and Managing Director Punit Goenka on September 14 defended the corporate governance track record of the media company at its annual general meeting (AGM).
On September 11, ahead of the AGM on Tuesday, proxy advisory firm Institutional Investor Advisory Services (IiAS) raised a red flag on the reappointment of two directors, Manish Chokhani and Ashok Kurien, and the adoption of its financial statements, citing corporate governance concerns.
Following this, Zee Entertainment’s largest shareholders, Invesco Developing Markets Fund and OFI Global China Fund LLC, which together hold 17.88 percent of the total paid-up share capital of the company, sought a special meeting of investors seeking the ouster of Goenka, son of founder Subhash Chandra, Chokhani and Kurien. The latter two have already resigned.
Clarifying about corporate governance
Addressing the shareholders at the 39th AGM, Goenka highlighted the company’s emphasis on corporate governance practices.
"As the Chairman suggested in his speech, we give strong emphasis on corporate governance. We have examined the matter, and will take necessary steps as applicable in the interest of all shareholders," he said.
Chairman R Gopalan, during the AGM, highlighted Zee Entertainment's 4.0 vision and said that the company has enhanced its focus on governance in a granular manner by several notches. Zee 4.0 is the new strategic intitiave of the company where it will focus on 5G, or governance, granularity, growth, goodwill and gusto.
"Stronger governance continues to be a key tenet of Zee 4.0 and the various new policies that have been introduced have enabled the company to mitigate its risks and safeguard its business interests," Gopalan added.
But not all shareholders bought into this argument.
Krishnan TS, a shareholder from Chennai, said during the AGM, "Given the developments over the last 24 hours regarding the EGM (extraordinary general meeting which Invesco has called for) for the removal of Board of Directors, I think it's just. It's also the fact that the stock market has welcomed such a move and that's a reflection of the state of corporate governance in the company."
Corporate governance concerns
According to IiAS, the audit and remuneration committees, of which Chokhani and Kurien who were members, had approved a 46 percent rise in Goenka’s pay for FY21 while employees received no raise. And Goenka’s revised pay was higher than what shareholders had approved in the 2020 AGM.
Also, IiAS noted that both Chokhani and Kurien are accountable for the failure to address and adequately deal with governance concerns that led to the resignation of independent directors in the past.
During the AGM, questions were raised on the resignation of Kurien and Chokhani. A shareholder, Tamal Majumder, asked the real reason behind their stepping down as independent directors.
On this, Goenka said the reason for resignation is self-explanatory in their resignation letters. "I think we must respect the choice of wanting to spend their time in other things that they are devoted to."
In a regulatory filing, Zee said that Chokhani had cited changed circumstances and perspective post COVID, and Kurien his pre-occupations as reasons for the resignation.
Shareholders question Invesco
Some of the shareholders also questioned Invesco and asked the fund to be transparent with shareholders.
"Invesco is having some problems. So, if they have any problems they should take us into confidence. Also, they should come in the AGM and explain what is wrong with the company. I hope Invesco is listening. They should not just show the power by the shareholding. They should also come back to the shareholders and explain why we should vote for them. We will be open minded and we will decide on merits," said shareholder Manoj Gupta.
Shareholders also pointed out the new appointments of Vivek Mehra and Sasha Mirchandani as independent directors.
One shareholder said, "I support all resolutions as well as all appointments and reappointments."
The verdict on key resolutions that were up for voting at this AGM, including adoption of financial results, will be out on September 16.
Extraordinary general meeting
After September 16, however, all eyes will be on the Extraordinary General Meeting called by Invesco and OFI Global for the ouster of Goenka. The institutional shareholders have also asked for the induction of six new members - Surendra Singh Sirohi, Naina Krishna Murthy, Rohan Dhamija, Aruna Sharma, Srinivasa Rao Addepalli and Gaurav Mehta for independent directors’ position at Zee.