Corporate Governance

Magazines and Market players often downplay the significance of fundmanagers from Mutual fund industry. And these Fund managers were patient beyond extend inspite of their capabilities. Atlast SEBI has distincly observed the important role to be played by Fund Managers in Corporate Governance.

While many innocent investors continued to hold Satyam share during its downfall, many of the Mutual Funds ( DSP, Franklin, Sundaram to name a few) dumped Satyam shares from Rs.480 per share to Rs.180 per share. And even today Satyam is yet to touch Rs.180. Timely action by Fund managers saved huge money for Investors. Hope Investors understand, appreciate and include Mutual funds in their core portfolio.

Following is extract of the article that highlights the role to be played by MF's:
"In December 2008, when Srinivas Vadlamani, former chief financial officer, and B. Ramalinga Raju, founder and former chairman of Satyam Computer Services Ltd, met fund managers and analysts on a conference call to explain the rationale of acquiring 100% stake in Maytas Properties Ltd and 51% share in Maytas Infrastructure Ltd for $1.6 billion, all hell broke loose. While Satyam Computer Services was into information technology, Maytas Properties was into real estate and Maytas Infrastructure into infrastructure. Moreover, both were owned by Raju’s children.

Fund managers vociferously opposed the proposed takeover. The reporter has the transcript of that call. They expressed their shock, called the transaction an example of “third grade corporate governance practices” and expressed concerns that this could possibly lead to a scenario where foreign investors would desert Indian companies. Fund managers and analysts forced Satyam to abandon the plans, which would have cost the minority shareholders of Satyam dearly. A few days later, Raju admitted to fraud. Although investors of Satyam lost eventually, it was probably one of the few instances in public light where fund managers and equity analysts protected the right of the minority shareholders and put pressure on a corrupt management to change course.

Sebi now wants MFs to be more active in corporate governance. Sebi feels it is appropriate to allow MFs to voice their opinion as they are vehicles for small investors. Sebi has now made it mandatory for funds to disclose whether they voted for or against moves (suggested by companies in which they have invested) such as mergers, demergers, corporate governance issues, appointment and removal of directors. MFs have to disclose it on their website as well as annual report. “As markets mature, institutional activism will definitely rise,” says Jayesh Shroff, fund manager, SBI Funds Management Pvt. Ltd. "

Original article : http://www.livemint.com/2010/03/16220634/Sebi8217s-new-notifications.html