Institutional EYE

Commentary on Corporate Governance Issues

Directors as change agents

Owning shares entitles you to dividends and voting rights. Secured lending in the extreme, entitles you to seize the assets of the company to make your money whole. Recent developments in Yahoo Inc. pose a question that if a minority equity holder in the US is able to nominate directors to the board (- or initiate the nomination in this case) to influence the future direction of the firm, then why are lenders in India not doing the same? A quick recap on the events at Yahoo. Starboard Value, an investment advisor, recently wrote to the shareholders of Yahoo Inc. about seeking the election of its nine nominees to the company’s Board. In its letter Starboard stated that “Yahoo is deeply under

Public Sector Banks: A Capital Question

The Government of India’s (GoI) plan to help public sector banks (PSB) make a fresh start is well intentioned. Replenishing lost capital is necessary, but it comes with several constraints. For one, GoI’s insistence on maintaining a 50% equity in PSBs from raising capital from the market. On the other hand, SEBI’s requirement of GoI reducing its stake in PSBs to 75% of less by August 2017 also constrains further GoI infusion for several weak PSBs. But, providing for bad loans is not enough. Why will raising the required capital – assuming they do, stem future loan losses? Given the changing landscape, GoI must ask itself, will PSBs remain relevant in the banking sector in future? Read the fu

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