Escorts AGM: Institutions dissent heavily on three resolutions

Adoption of accounts for FY15, appointment and remuneration of one related party director and payment of professional fees to another director saw stiff opposition

Institutional shareholders have predominantly voted against three key resolutions proposed by the management in the recently concluded annual general meeting (AGM) of Haryana-based tractor maker Escorts.

According to the results declared, though all the nine resolutions were passed, adoption of accounts for financial year 2014-15, appointment and remuneration of one related party director and payment of professional fees to another director saw stiff opposition from the institutions, which hold a little over nine per cent stake in the company.

On the first resolution for adoption of accounts, the results show of the 14.95 million institutional votes, 12.63 mn or 84.5 per cent participated through e-voting. None of the institutions attended the physical poll at the AGM. Of these 12.63 mn votes, 9.77 mn or 77.3 per cent of votes polled went against approval of the accounts.  

While nearly 95 per cent of the institutional votes went in favour of the resolution to appoint G B Mathur as a director, most of these opposed the next resolution to pay him professional fees. Mathur has a long association with the company, as associate vice-president and then as VP, legal and company secretary, from 1998.

The company stated: “He is part of all the major restructuring and other important corporate decisions taken from time to time.” While he was brought into the board as a non-executive director, the second resolution proposed by the company was to pay a fee of up to Rs 2.5 crore for Mathur’s professional services, to be rendered in the areas of ‘corporate social responsibility and special assignments’.

Institutions, worried about the nature of these payments, voted against. Of 12.63 mn votes polled, 11.62 mn or 91.98 per cent went against the payment to Mathur.

On the resolution to appoint Nitasha Nanda, daughter of Escorts promoter Rajan Nanda, a director and remuneration thereof, 71.5 per cent of the institutional votes went against. The proposed remuneration was Rs 5 lakh a month. She was also eligible for variable pay, for which no cap was mentioned.  

These are among the highest percentages of ‘Against’ votes registered by companies in this year’s AGM season.

Last November, United Spirits had seen nine of its resolutions bite the dust after institutions predominantly voted against. Three of those saw over 70 per cent of minority votes going against.

However, the Escorts resolutions went through with the requisite majority, as the promoters and the Escorts Benefit and Welfare Trust, whose trustee, S A Dave, is part of the promoter group shareholders, voted in favour.

In response to an e-mail seeking comment, Ajay Sharma, group counsel and company secretary, said: “We wish to state that the Trust is a distinct legal entity, governed and controlled by its charter (constituting documents) and has its own decision making authorisations, including but not restricted to voting at the General Meetings.”

As of June, Goldman Sachs India Fund was the largest institutional shareholder, with 2.4 per cent stake. Some 64 foreign institutions hold a combined five per cent, while 56 domestic institutions hold 1.6 per cent in the company. Ace investor Rakesh Jhunjhunwala is the single largest non-promoter shareholder, with 8.14 per cent stake.