LIC, mutual funds oppose Punit Goenka’s appointment as Zee managing director

Goenka resigned as Zee managing director on November 18, a month after the board recommended him to serve as managing director and CEO for another five years, 10 days before the annual general meeting, after which the vote for his candidacy will be announced result. The decision follows views expressed by its largest shareholder and advice from two proxy advisers rejecting his continued leadership of the media group.

Goenka said he wanted to focus entirely on his operational responsibilities and offered to stay on as CEO of the company, an offer accepted by Zee’s board of directors.

LIC owns 4.63% stake in Zee, while founder and chairman emeritus Subhash Chandra and his family own 3.99%. Around 15 mutual funds held a combined 12.4 per cent stake in Zee as of September quarter-end, with at least two mutual funds holding more than 1 per cent stake each in support of LIC, the person added.

Calvert Research & Management, part of Morgan Stanley Investment Management and New York City Group Trust, which manages about $200 billion in assets, rejected Goenka’s re-election, according to documents reviewed. Mint. “He has resigned as managing director of the company and continues as chief executive. Shareholders may question whether any changes to the remuneration structure are necessary due to changes in his role and scope of responsibilities,” Calvert explained. “The proposed remuneration is competitive compared to industry peers. Accurate weighting can be provided for each identified financial parameter. 2.5% of net profit as a cap on the proposed remuneration may result in a wide range of expenditures”. Mint Morgan Stanley and New York City Trust Co.’s ownership of Zee could not be independently determined.

However, not all big investors are opposed to Goenka’s re-election. Norges, the world’s largest sovereign wealth fund with a 3.96% stake in Zee, approved Goenka’s reappointment as managing director and chief executive, according to documents seen by Mint.

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Meanwhile, proxy advisers Institutional Investor Advisory Services (IiAS) and InGovern Research Services recommended voting against Goenka’s continued operations, citing alleged governance lapses, a failed merger with Sony Corporation’s Indian unit, declining profits and a hit to shareholder value. erosion. Large institutional investors collectively hold about 37.71% of Zee and often rely on proxy advisors when voting on resolutions of investee companies.

Queries emailed to LIC and Zee spokespersons on November 19 remained unanswered as of press time.

LIC’s opposition

This is not the first time that LIC has voted against Zee’s board appointment. It has voted against the re-election of three directors of Zee since September 2021, a rare incident of dissent for the state-owned insurance company. LIC is India’s largest insurance company. $51.2 trillion (US$600 billion) in assets under management as of March 31, 2024.

According to disclosures by the public sector insurance major, LIC had voted against the reappointment of Manish Chokhani and Ashok Kurien as directors in September 2021. However, the pair withdrew their nominations hours before the shareholders’ meeting, invalidating the resolution seeking reappointment. In July 2023, LIC once again refused to re-elect independent director Alicia Yi.

“As a member of the NRC, she was responsible for ensuring the diversity of skills and experience on the board. Additionally, it was observed that the board of which she was a member failed to address and adequately address governance issues raised by previous independent directors,” LIC said. Yi Gang failed to gain candidacy as 58% of shareholders voted against a partner at headhunting firm Korn Ferry.

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Since 2021, Zee has faced an investor revolt, the exit of many large foreign investors, a failed merger with Japan’s Sony to create a $10 billion media giant, lawsuits and investigations by market regulators. During Goenka’s current tenure, which began on January 1, 2020, Zee shares have fallen by 60%. The Sensex rose about 86% during the same period.

At Thursday’s general meeting, shareholders will approve two proposals regarding Goenka: one to reappoint him as a director; Second, he was reappointed as the company’s managing director and chief executive officer for a five-year term. The second resolution has become moot as Goenka resigned as managing director and withdrew his decision to agree to his re-appointment.

CEO role

Corporate law experts say that unlike the appointment of a managing director, the appointment of a CEO is the prerogative of the company’s board of directors and does not require shareholder approval. In other words, Zee did not need to engage with shareholders to approve Goenka as CEO.

“Thus, it is the key management personnel (KMPs) who are appointed and not the company directors. The appointment and remuneration of the CEO will be approved internally by the company and not by shareholders, and will be subject to necessary disclosures,” said Gaurav Pingle, a practicing firm. secretary.

Even if shareholders veto the resolution to re-appoint Goenka as director, it will not affect his appointment as CEO.

“By voting against Mr Punit Goenka’s re-appointment, shareholders will send a signal that they are seeking a leadership change. While Mr Punit Goenka may demonstrate his interest by relinquishing the MD position and continuing as CEO, this is This is not a desirable outcome for shareholders,” said Shriram Subramanian, managing director of proxy advisory firm InGovern.

Goenka’s achievements

Goenka will focus on the role of CEO and has formed a new horizontal team structure to drive growth, Zee said in a release. He visited all of the company’s language markets to understand consumer preferences and refocus the company, the company said. He is also focusing on new monetization avenues to increase advertising revenue, according to a Zee press release.

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In the notice of annual general meeting on November 4, Zee laid out the steps Goenka has taken as MD and CEO to create shareholder value. This includes settling all outstanding cases with Sony over the failed merger without paying any penalties. The company also highlighted Goenka’s restructuring plans, including improving Ebitda margins from 9.7% in the January-March 2024 quarter to 16% in the July-September quarter.