Opting for an alternative shareholder group, if an existing management has been discredited, has to be a joint decision of all shareholders of financial institutions, he says.
The stand of FIs on this issue has come into focus since, over the next few days, the premier Indian development financial institutions will have to take a stand on the management control of one of the largest Indian companies, the ITC Ltd. In the past, the Indian FIs have been guided by the general principle of not destabilising existing managements.
The stand taken by the FIs will vary according to the facts and circumstances of each case and their collective wisdom at that point of time, the IFCI chairman told Business Standard in res-ponse to a question as to what stand the FIs should take once the existing management of a company has been discredited through any special investigative authoritys conclusions.
Asked what should be the ideal role for FI nominees on corporate boards in the context of the recent sketchy record of companies on basic principles of corporate governance, the response was: The role of FI nominees on corporate boards would be to safeguard the interests of the institutions and adherence by them to sound public policy.
On whether the FIs should opt for an alternative shareholder group seeking to pick up the reins of management, Agarwals response was: Whether the FIs should back the alternative group of shareholders will depend on several factors and a joint decision will have to be taken by the FIs.
There was no direct reference to the ITC in the IFCI chairmans responses. However, the statements assume importance in the light of the nearly four-year-old struggle for control of the ITC by BAT Plc of Britain and the fact that the existing ITC management is under pressure from various Indian authorities.
The FIs control 34.86 per cent in the tobacco major, representing four non-executive directors on the board.
The ITC now has seven non-executive directors on its board, which also has two BAT nominees and one of the Life Insurance Corporation.
The finance ministry had questioned the role of nominee directors on the ITC board with respect to the alleged management irregularities and Fera violations by the company.
