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Business

For Indian investors, shareholder meetings are Speakers' Corners

Lots of talking but little transparency in decision making

Local journalists gather in front of Tata Motors' shareholder meeting in Mumbai in December.

MUMBAI -- Business embodies a nation's character, and shareholder meetings are no exception. India, like the U.S., Europe and Japan, has its own distinctive style. 

In December, as the year drew to a close, a wave of extraordinary shareholder meetings attracted attention from India's business circles. On Dec. 13, Tata Consultancy Services, a major information technology company and a unit of the Tata group, India's largest conglomerate, met its shareholders. Four other Tata group companies followed suit after Dec. 20, including Tata Steel and Tata Motors.

The purpose of the shareholder meetings was to discuss the motion to dismiss Cyrus Mistry as director. At some of the meetings, participants also discussed whether to remove outside directors who supported Mistry.

Back in October, Tata Sons, the group's holding company, suddenly removed Mistry from the post of group chairman, reinstating founder Ratan Tata as temporary chairman. But Mistry remained as director, among other posts, at group companies and confronted Ratan. Tata Sons then asked those group companies to hold shareholder meetings to dismiss Mistry as director. In the end, Mistry offered to resign on Dec. 19, ahead of the stream of shareholder meetings.

More talk than questions

The shareholder meetings were indeed extraordinary. General investors mostly used the question-and-answer sessions to make grandiose speeches rather than ask questions. Unlike in Japan, where investors raise their hands and the moderator takes their questions one by one, in India a group of preselected individuals take the stage to express their opinions, often for as long as they want. At TCS's shareholder meeting, about 40 investors spoke and the meeting lasted three hours. Tata Steel's lasted over five hours with more than 90 speakers.

Shareholders of Indian Hotels, a Tata group unit, attend an extraordinary shareholder meeting on Dec. 20.

Tata Motors shareholders were asked to limit their comments to three minutes. A red flashing light was installed next to the lectern to notify the speaker when the time was up. But few seemed to care. A middle-aged investor appeared onstage and started by saying that his talk would not end in three minutes. He went on to speak for nearly five minutes, criticizing Mistry and his supporters.

A modest-looking elderly woman at the TCS shareholder meeting was heckled by other investors as she spoke. "Irrelevant!" "Too long!" the audience jeered. Undeterred, the woman continued to make her case for Ratan, insisting it was relevant to what was being discussed.

India is not only populous but diverse, with many different languages, religions and ethnicities coexisting in the same space, said Duru Arun Kumar, associate professor of sociology at the Netaji Subhas Institute of Technology. She believes it is this diversity that makes Indians vocal in expressing themselves -- lest they be lost in the crowd. People then grow comfortable doing it in public, she explained.

Investors at the shareholder meetings were diverse. They freely expressed their opinions and the audience heckled and praised them. Sometimes, there were quarrels between investors in the audience. People also talked a lot as they listened to the speaker. The meeting proceeded with participants making their voices heard. The scene reminded outsiders of the popular phrase in the country: India is the world's largest democracy.

What was also unique about the gatherings was a high level of individual worship. Most investors showed respect for Ratan, who attended all of the extraordinary meetings -- Mistry was not seen at any of them. Some even went to Ratan to ask for a handshake as they stepped off the stage.

Still hierarchical

Such tradition is not confined to the Tata empire. At the 2015 regular shareholder meeting of Reliance Industries, the leading private oil refiner, a middle-aged investor read a poem she had written during a question-and-answer session, praising Chairman Mukesh Ambani, eldest son of the Reliance group founder, and his wife Nita.

Indian companies have grown significantly over the past few decades and their share prices have gone up, which has hugely benefited older investors who hold shares in such major names like Tata and Reliance, said a journalist in Mumbai.

The unique tradition of Indian shareholder meetings may also owe something to the country's history. India today is still a very hierarchical society based on the old caste system, noted NSIT's Kumar. In particular, the tendency to praise power and authority in public is still persistent, she said.

The shareholder meetings may be a reflection of the issues faced by the Indian government and companies. Although the atmosphere was quite democratic, there was little dialogue between the investors and the management: While investors cared more about expressing themselves than asking questions to clarify things, the management offered little explanation in response to investors' comments.

People are free to talk but decisions are made by a just a handful in power. The shareholder meetings illustrate one reason why Indian society is so murky.

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