Renuka Kumar, a Joint Secretary in the Ministry of Corporate Affairs, has said that a provision for class action suits was made in the new Companies Bill to ensure shareholder democracy and investor protection.
Participating in an interactive session with delegates to the national convention of company secretaries here on Saturday, Ms. Kumar said the bill, which is before the Parliamentary Standing Committee, sought to adopt a decentralised approach without any Government control.
The bill aimed at widening the scope of shareholder democracy by mandating companies to follow right disclosure norms. This assumed significance because 85 to 90 per cent of the eight lakh companies in India were promoter-run industries. There was the danger of misrepresentation of facts if adequate responsibilities were not cast on promoters.
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Ms. Kumar said the bill also tried to empower shareholders to have a say on pay-outs to managers by the companies. A set of guidelines were being prepared to enable the shareholders to decide managerial remuneration.
A debate was required in this background to know if the bill empowered shareholders sufficiently to take the right decisions. The objective was to see that “the shareholder feels like a king” in the matter.
She referred to instances where directors demanded four-fold increase in salary when the companies were in the red.
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The right disclosure norms would empower shareholders to question such a steep increase in salaries.
A chartered accountant, J. Krishnamurthy, expressed apprehensions that promoters would have sway in shareholder democracy if one share one vote norm was continued. They could enjoy a substantial voting power on the strength of their shareholding. He wanted the Government to recognise shares of promoters as property rights and amend law accordingly if democracy was to flourish. Their right could be modified, curtailed or even dropped, he suggested.
The company secretary of Oil India, S. R. Krishnan, sought a threshold limit to become shareholders of companies. Otherwise, a single shareholder was as good as one holding shares in bulk.