Investors who had fought against high dematerialisation charges for over three years were relieved when former SEBI chairman G.N. Bajpai announced in February 2005 that Depository Participants (DPs) cannot charge account opening charges and custody charges. Starting April, depositories can make up this loss by collecting fees from companies/issuers, who are the single-biggest beneficiary of dematerialisation. But investor groups now say many DPs are twisting SEBI’s diktat through new charges and deposits. SEBI has now asked investor groups for specific complaints and promised to initiate action wherever necessary. However, this is clearly an opportunity for companies who claim high governance standards to set an example by voluntarily offering to bear a part of the dematerialisation costs. This will benefit their shareholders and also help to grow the retail investor population by reducing entry costs to equity markets.
Compensation blues
As Indian corporate salaries, especially those of freshly minted management graduates skyrocket, it is time to take a closer look at how the US, the torchbearer for free markets, scores on the executive compensation front. The news isn’t good. The Washington Post reports that, “The laws of gravity continue to be inapplicable in the area of executive pay’’. It also documents how exit packages and bonuses (which rose 46 per cent to median at the 100 biggest companies) are completely unrelated to performance. For example: Carly Fiorina walked away with a $42 million exit package after being eased out of Hewlett-Packard for lacklustre performance, Harry C. Stonecipher of Boeing was asked to go over an affair with a female employee, but took home retirement benefits of $600,000 per year. Franklin D. Raines had to leave Fannie Mae due to accounting problems but still got $114,393 per month in pension benefits. General Motor’s Rick Wagoner took a $2.2 million pay hike although GM announced its biggest loss in a decade. Clearly companies pay more money to top executives whether corporate performance is great or lousy.
It is the same in India. Many Indian private sector managers complain that top executives of listed multinational FMCG companies got bigger pay packets even while their corporate performance slid alarmingly. But unlike the US, where the SEC is exploring greater disclosure of executive compensation (including corporate jets and deferred compensation), Indian investor activists, fund managers and institutional investors have yet to question that lack of correlation between performance and compensation at the top of the corporate pyramid.
State largesse
Mumbaikars always believed that large tracts of land in the heart of the city legitimately belonged to the mill owners who are seeking to extract new value by building glittering new Malls and expensive residential complexes. Activist Shailesh Gandhi’s RTI campaign revealed that these lands were merely leased to the mills and the issue is now the subject of a high intensity legal battle. Interestingly, Gandhi points out that far from being vague the leases are very specific about land usage and require the Mill Owners to get specific government permission for any change in land usage. For instance, the salient features of the Morajee Gokuldas lease deed culled out by him specifies: that the land is to be used ’as residences and for purposes connected with or incidental to spinning and weaving mill including a stable...’. The lease period is very specific at ‘Nine hundred and Sixty-five years Four months and Twenty-two days’. It clearly spells out the right of the owner (government) to decide on any construction activity to be undertaken and goes so far as to prohibit construction of any building on any open space without the previous consent of the Commissioner.
It prohibits the lessee from even displaying advertisements and also specifies ho the land shall be maintained. Although the Commissioner has the right to grant permissions, it is clear that this couldn’t possibly change the original intent of the lease or allow all land benefits to accrue only to the Mill Owners.
Tailpiece: Now that Hindustan Aeronautics has allowed commercial flights to Nashik from its airport, the region is suddenly likely to have two close air connections. The Maharashtra Airport Development Company is planning a separate airport at neighbouring Shirdi which has captive pilgrim traffic going up to 70,000 a day on weekends. A part of these will surely provide a market for small, no-frill carriers. At the same time, Nashik is fast growing hub for wine and engineering companies, providing its own heady commercial strength. If both airports take off, it will be another sign of India’s steady economic progress.
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