Zee board backs former directors, condemns 'baseless' allegations

The board stands by and strongly condemns the allegations made by certain proxy advisory firms against its former directors, Ashok Kurien and Manish Chokhani, said the company

The board of Zee Entertainment Enterprises Ltd (ZEEL) on Thursday backed two of its former directors, Ashok Kurien and Manish Chokhani, who are facing allegations of corporate governance lapses by proxy advisory firms and had quit just two days before the annual general meeting held on Tuesday.  

In a statement, Zee said the speculations disparaging the contribution of the two directors are baseless and arise out of inadequate understanding of the industry. "The decisions taken by board committee members and the entire board are being wrongly attributed to individual directors without any basis," the company said in a statement.
 

Zee's statement came after Invesco, which owns 18 per cent stake in the company, has sought removal of current MD and CEO, Punit Goenka, and appointment of six new directors on the board of the company as its nominees. Invesco called for an EGM to remove Goenka after two proxy advisory firms, InGovern and IIAS, said there are corporate governance lapses in the company with the promoter leading the company and is party to related party transactions.  

The promoters, Subhash Chandra's family, currently owns only 4 percent of the company, and had to sell their stake to pay off Rs 13,000-crore debt taken by the promoter entities after defaulting.  

Zee retaliated against the proxy advisory funds and said it is immensely grateful to both Kurien and Chokhani for their contribution towards the company.  "Their guidance to the leadership team has been valuable, enabling ZEE to touch newer heights and deliver greater value to all its stakeholders year on year. Under their collective direction, the company has consistently undertaken several initiatives to bring in more transparency to the shareholders," Zee said in its statement.

R Gopalan, Chairman of Zee Entertainment Enterprises Ltd. said: “The Board of ZEE Entertainment Enterprises Ltd. unanimously applauds  Kurien and  Chokhani, commending their professional conduct during their association with the company. It has been our privilege to have such esteemed members as part of the Board, and their contributions towards the company remain significant."

But proxy advisory firm InGovern alleged that it is on this audit committee’s watch that many of the related party transactions took place. "The audit committee has done little to safeguard the interests of the company and minority shareholders. Even the currently qualified consolidated financial statements show that little has been done to completely unwind all abusive related party transactions. The audit committee has not ensured that the put option is properly recognised in the books, according to the accounting standards, and some of the related party transactions have led to the promoters’ shareholding being reduced to 3.99 per cent," said InGovern.

Zee is probably one of the few companies where promoters retain significant control over the company with very little shareholding, it said, adding that promoter director Goenka has been given a 46 per cent remuneration increase to Rs 13.16 crore, at a time when other employees received zero raise.

On the other hand, another proxy advisory firm, IiAS said the board must bring in the right mix of professionals who have an understanding of the media and digital business. "Further, having the erstwhile promoters on the board may impede the directors’ ability to take hard decisions,” it said.

Last week, Dish TV also announced that Yes Bank had sent a communiqué to the company, seeking removal of the present MD, Jawahar Goel, and other independent directors over lapses in corporate governance. Dish was part of Essel Group and is run by Zee Group patriarch Chandra’s brother. Yes Bank is unhappy with a Rs 1,400 crore investment made by Dish TV in an OTT platform, Watcho and is seeking a forensic audit.