Appointment of promoters questioned

In its latest crusade against companies violating corporate governance norms, proxy advisory firm Stakeholders Empowerment Services (SES) has directed attention to Cairn India.

SES has raised questions against the appointment of promoters who are acting as ‘super shareholders’ at the oil and gas exploration and production company.

The advisory firm has asked the shareholders to vote against the appointment of Navin Agarwal, Tarun Jain and Priya Agarwal as Directors as they were appointed additional directors a few months ago and their term of office is not liable to retirement by rotation.

Section 255 of the Companies Act, 1956, states that “Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall be persons whose period of office is liable to determination by retirement of directors by rotation.”

The firm, which provides investors with independent opinion on governance issues, was started by former SEBI Executive Director J.N. Gupta and whole-time director M.S. Sahoo.

SES has also raised questions on the huge remuneration received by promoters in companies such as Divi Labs and Apollo Hospitals. It has objected to the appointment of S.R. Batliboi & Co as statutory auditors of the company and asked shareholders to vote against the resolution in the upcoming annual general meeting on August 22.

It said the audit firm has been associated with the company since the past six years, thus violating clause III (c) of the Corporate Governance Voluntary guidelines that a company must rotate the audit firm every five years and the audit partner every three years.

It also questioned the appointment of Edward T. Story as independent director as he has been in the company for the last 15 years — six more than SEBI’s listing guideline of nine years.

Asked to comment on these issues, Cairn India’s spokesperson said: “We have taken cognizance of the voting recommendations by the respected firm, Stakeholders Empowerment Services. While the proposals will be decided at the AGM, none of the concerns made out in this report are factually true or valid. The Cairn India management will place its views before the general body of shareholders, to facilitate a decision on the proposals.’

(With inputs from

Richa Mishra, New Delhi)

(This article was published on August 17, 2012)
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