In a rare instance of retail shareholder activism in India, the small shareholders of Zee Entertainment have defeated the proposal to reappoint Punit Goenka as a director. This, despite the fact that Goenka managed to secure a majority in terms of institutional investor votes, data analysed by Moneycontrol from stock exchange filings showed.
n the AGM that was held on Thursday, Punit Goenka lost the reappointment bid with a wafer-thin margin of less than 0.5 percent as 50.5 percent votes polled went against the proposal. Within institutional investors, 52 percent voted in favor of Goenka’s appointment but the retail investors overwhelmingly voted against the proposal tilting the scale. According to the data, 88 percent of retail investors voted against appointment of Goenka while only 12 percent supported.
The development assumes significance since generally India’s retail investors do not participate much in shareholder activism or defeat any major proposals. Governance experts said the average retail turnout for such voting is around 3-5%. However, in the case of Zee, 13% of retail shareholders cast their vote rejecting Goenka’s reappointment.
Market participants said retail investors of Zee have been miffed with Goenka ever since the potential $10-billion merger between Zee and Sony fell through in January. During the time, both Zee and Sony executives accused each other of not honouring the deal commitments. Shares of Zee Entertainment lost over 54 percent in calendar 2024 so far following the news of deal fallout. On Friday at 10:30 am, Zee Shares were trading 5 percent higher at Rs 129.25 apiece.
“As expected, shareholders have voted against Puneet Goenka’s reappointment. The Board of Directors, as trustees of shareholders, need to change the leadership of the company,” said Shriram Subramanian, founder, Ingovern – a proxy advisory firm.
Retail investors put together own 41.6 percent stake in Zee Entertainment, according to September quarter shareholding pattern. There are about 6.6 lakh small shareholders in Zee whose value of shareholding is less than Rs 2 lakh as per Sebi rules. These investors own 33.35 percent. Additionally, 103 high-networth individuals own another 8.24 percent in the company, data showed.
Domestic mutual funds own 12.39 percent in Zee with HDFC Mutual Fund, Nippon India Fund and ICICI Prudential Mutual Fund all owning more than 2 percent apiece in the company. Insurance companies own another 6.39 percent in the company, led by state owned Life Insurance Corporation with a stake of 4.63 percent. Foreign portfolio investors (FPIs) comprising of index funds such as Vanguard own 17.5 percent in the company while Goenka’s family owns 3.99 percent, data showed.
However, governance experts add that the rejection of his directorship may not have any immediate impact on Goenka’s tenure as Chief Executive Officer(CEO) of the company, as long as the board backs him. According to the rules, CEO of a company is appointed by the board and a person needn’t be a director to be a CEO. Even the remuneration of the CEO is decided by the board and not by the shareholders.