FINANCIAL INSTITUTIONS
crystallised their positions? Or is it that over
Deal-Making in Private
A correspondent writes:
PHILIPS' decision to sell its Salt Lake
manufacturing establishment in Calcutta has
evoked more than ordinary interest in the
media and in corporate circles. An important
landmark was set to vanish from the city and
not unexpectedly the general meeting of
shareholders called last week specifically to
approve the proposal turned out to be a
turbulent affair. Wrangles over procedure
and technicalities marked the proceedings.
In this situation, the financial institutions,
with a shareholding of about 20 per cent
among them, could have given the lead in
imparting a constructive direction to the dis-
cussion, Instead, their representative chose
to remain aloof and uninvolved at the meeting.
What were the issues? The company sought
to explain the closure of its Salt Lake facility
as having been forced upon it by the
competitive environment and the emerging
technological imperatives. The restructuring,
the company spokesperson pointed out,
involved complex issues of management of
technology-determined work processes,
focusing on core competence, out-sourcing
of activities turning out to be peripheral and
cost-effective logistics for customer-friendly
marketing. Immediately, however, there was
the question of how the interests of the
employees directly affected by the sale of
the Salt Lake establishment were going to
be accommodated. The company naturally
claimed it had struck a balance which was
the best achievable in the circumstances. But
was this really the case?
The financial institutions should have been
expected to bring these issues into the open
at the shareholders' meeting so that the
management of the company would have
been compelled to share with the ordinary
shareholders and the public at large all the
information and calculations which, it
claimed, it had provided to all the regulatory
and administrative authorities, including the
government of West Bengal But how did
the financial institutions actually respond to
the challenge? According to press reports,
their representative at the meeting made a
bare four-sentence intervention to make the
bald announcement that the institutions would
support the official resolution approving of
the step takenbythe company's management
if it were only amended to make it subject
to the institutions' approval. Evidently the
institutions had no stomach for participating
in an open discussion at the shareholders'
meeting and were signalling their preference
for closed-door discussions with the company
in the seclusion of their corporate offices.
Was this because the mandatory notice period
of three weeks for the shareholders' meeting
3160
had not been enough for them to have
in the two most populous states of Uttar Pradesh
the years such closed-door negotiations and
deals have been their established approach?
Under the law the financial institutions enjoy
no special privileges or status not available
to other shareholders; yet that they so non-
chalantly insisted on a specialrightof approval
over and above approval by shareholders
showed deeply entrenched attitudes attuned
to special treatment and deal-making in
private which make a mockery of what is
understood by corporate democracy.
The types of issues that the Philips' pro-
posal has raised will increasingly come to
the fore with the restructuring of companies
and businesses that is under way in many
sectors of our economy. Enhancing share-
holder value has to be the primary concern,
but manage-ments have to be wise enough
not to be dismissive of the concerns of other
interest groups. In the coming months and
years shareholders of many companies, large
and small, will be called upon to understand,
review and evaluate the increasingly complex
and intricate decisions of managements. The
basic purpose of such meetings of share-
holders will be lost if procedural wrangles
are allowed to obscure substantive issues.
Minority individual shareholders cannot
always be expected to fully comprehend,
much less counter, the sophisticated moves
by entrenched interests in powerful com-
panies. So the financial institutions have to
step in and shoulder their responsibility.
Wherever they have substantial share-
holdings, investors would expect them to
discharge their role wisely and objectively.
Financial institutions have to share their
concerns openly in general body meetings
of shareholders. That would help to lay the
foundations of responsible and transparent
corporate behaviour. Unless they are prepared
to take on this role seriously, we run the risk
of slipping into a situation in which, as has
happened in Japan and several other
countries, shareholders' meetings are fixed
and stage-managed to suit the purposes of
company managements.
POLITICS
Not Easy for Congress
A SIGNIFICANT feature of the recent
assembly elections in the three north Indian
states has been the retrieval of the dalit and
minority vote by the Congress for thefirsttime
in the post-Ayodhya period. Even in UP, in
the assembly by-election from Agra, where
dalits and Muslims constitute a sizeable pro-
portion of voters, the Congress came second,
ahead of the Samajwadi Party (SP). A month
back in Bihar Congress had been successful
in holding on to four legislative council seats.
Yet speculation that the shift in dalit and
Muslim voting patterns seen in the assembly
Economic and Political Weekly December 12, 1998
elections points to a comeback by the Congress
and Bihar is clearly premature.
In the three northern states that went to
the polls, the non-BJP, non-Congress parties
had little significant presence. While
whatever remains of the Janata Dal (JD) got
washed away in all the three states, the
SP and the Bahujan Samaj Party (BSP)
for the first time opened their accounts in
MadhyaPradeshandRajasthan,respectively.
Similarly, in the four assembly by-elections
in Bihar, though the Congress improved its
performance in terms of votes polled, it
achieved no breakthrough in terms of a
victory in any of the constituencies. Laloo
Prasad Yadav's Rashtriya Janata Dal (RJD)
captured three of the four seats indicating
that a possible Congress resurgence in Bihar
is going to be noCakewalk.Also, in the Agra
by-election the possibility of the voting trends
in the adjacent states having influenced the
poll outcome in favour of the Congress cannot
be ruled out. In any case, a single by-election
is obviously too insufficient a basis for
drawing general conclusions for a state as
vast and diverse as Uttar Pradesh.
Nevertheless, the impressive performance
of the Congress in the three north Indian
states, though largely at the expense of the
Bharatiya Janata Party (BJP), is cause of
consternation for parties like the SP, the RJD
and the BSP, It is not just a coincidence that
the Congress has so far cold-shouldered the
call of the Rashtriya Loktantric Morcha
(RLM) to topple the BJP-led government at
the centre. After its success in the assembly
elections, recapturing its base among the
dalits and minorities in Uttar Pradesh and
Bihar must rank very high among the
Congress Party's priorities. The SP and the
RJD are not unaware of this. The RLM's
'khabardar' rally in Patna, which captured
newspaper headlines for chief minister Rabri
Devi's intemperate remarks against the state
governor, was in fact intended to be a demon-
stration of the RJD's supposedly undimini-
shed hold over the crucial yadav-Muslim
vote bank despite their leader Laloo Yadav
being in detention on corruption charges,
The by-election results suggest that the RJD
stands to gain in north and central Bihar if
the Vananchal issue is pursued any further
by the BJP-led coalition at the centre, On
the other hand, Laloo Yadav's arch rival
Ram Vilas Paswan of the JD has been in
close touch with the Samata Party and a
fragile upper caste-dalit alliance may be in
the offing in Bihar. This leaves the Congress
with not much political space to become a
major player in the state.
Similar is the case in Uttar Pradesh, where
any attempt to make headway by the Congress
will sooner than later bring it into sharp
confrontation with the BSP and the SP, The
party will have to depend on some national
issue, besides just a national leader, to enable