HCC faces criticism on corporate governance issues

Company rejects criticism on disclosures, governance

Hindustan Construction Co (HCC), despite facing criticism for allegedly inadequate disclosures and on corporate governance issues on some resolutions it had put up at its recent annual general meeting, had all these passed with around 90 per cent of equity holders supporting these.  

The company had proposed to appoint promoter Ajit Gulabchand’s daughter, Shalaka Gulabchand Dhawan, as a wholetime director for five years, with remuneration to her for three years. The monthly pay would be Rs 4.75-6.25 lakh and the resolution gave the board of directors the power to later change it.

“The company has not disclosed the committee positions held by her in other companies. The resolution proposes unfettered power to the board to alter the terms of her appointment/remuneration, within the limits of the Companies Act,” proxy firm Stakeholders' Empowerment Services (SES) said in a report recommending ‘against’ vote.  

GETTING BY

• HCC had proposed to appoint promoter Ajit Gulabchand’s daughter as a wholetime director
• Proxy firm says firm has not disclosed committee posts held by her in other companies

SES contended the said non-disclosure did not conform to listing pact with bourses. And, the power sought for the board defeated the rationale in taking shareholder nod for executive remuneration and “are against the principles of good governance”.

The Business Standard   had sought HCC responses ahead of its AGM on July 14. The Business Standard met group chief financial officer Praveen Sood and company secretary Vithal Kulkarni on July 23 at their Mumbai headquarters.

On Dhawan’s pay, the executives said SES was wrong and any revisions would be subject to the range of Rs 4.75-6.25 lakh a month mentioned in the resolution. Kulkarni said Dhawan held no other committee membership of HCC and was not on the board of any other listed firm.

SES also alleged inadequate disclosure in other resolutions on the new articles of association, sale of assets and appointment of branch auditors. While the company required shareholders to visit the headquarters to inspect new articles, it did not give the names of branch auditors it sought to appoint and did not share enough details of sale price of the assets, it argued.

The company executives insisted all these resolutions complied with laws and noted all these had been passed by the shareholders with a thumping majority. On inadequacies in disclosure and other governance issues, Sood, the group finance head, said SES' arguments fell in two broad categories. One, those necessitated because of changes in the Companies Act or regulatory requirements.  Two, those enabling in nature and required by the company because of the nature of the business and practical business requirements.

"We are in the business of bidding and doing contracts not known at the beginning of the year...Our projects  can happen anywhere in India, anywhere in the world. It can be in the form of joint venture or a separate company in any other country, requiring different sets of auditors. Some of these enabling resolutions have a history of 10 years and have not been used at all,” he said.

 Sood said the firm followed better corporate governance practices, by keeping shareholders informed in advance.