The largest shareholder of Zee Entertainment Enterprises, Invesco Developing Markets Fund (formerly Invesco Oppenheimer Developing Markets Fund) and OFI Global China Fund llC, holding 18 per cent stake in the company have called an extra-ordinary general meeting of shareholders seeking to remove Punit Goenka, currently MD of the company, from the board and two independent directors.
In a late evening statement to the stock exchanges, Zee Entertainment said the funds sought appointment of six of its own nominees on the board of Zee. The promoters, Subhash Chandra family own only 4 percent of the company and had to sell their stake to pay off the debt worth Rs 13,000 crore taken by the promoter entities of ZEEL after defaulting.
But just ahead of the AGM on Tuesday, two independent directors, Ashok Kurien and Manish Chokhani resigned from the board of the company on their own. This was after proxy advisory firm Institutional Investors Advisory Services (IiAS) had raised serious corporate governance concerns in the company by asking shareholders not to vote for re-appointing the duo on the company’s board at the AGM.
Invesco said as ZEEL is required to seek an approval from the Ministry of Information and Broadcasting in connection with the appointment of the new independent directors, it has enclosed the relevant declarations and information required from each of the proposed Independent Directors. “Accordingly, we request the company submit an application with the Ministry seeking approval for the appointment of the proposed independent directors at the earliest,” it said.
The proposed directors are: Surendra Singh Sirohi, Naina Krishna Murthy, Rohan Dhamija, Aruna Sharma, Srinivasa Rao Addepalli and Gaurav Mehta.
IIAS had asked shareholders to vote against the proposal to re-appoint Kurien saying that he was the founder of the Zee group and while the company has reclassified him as a non-promoter, no requisite regulatory filings or shareholder approval was sought for the same, and hence it classifies him as a promoter.
“Kurien was a member of the audit committee in FY20 and is accountable for the losses on account of related party transactions as well as governance concerns outlined by previous independent directors, which resulted in significant erosion in shareholder wealth,” the IiAS had said, adding that the promoter equity declined to 3.99 per cent as on June 30, 2021.
“We believe that the board must bring in the right mix of professionals who have an understanding of the media and the 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 communication to the company seeking the removal of the present managing director, Jawahar Goel, and other independent directors over lapses in corporate governance. Dish was part of the Essel group and is run by Zee group patriarch Subhash Chandra’s brother.
IIAS said as a member of the NRC of ZEEL, Kurien was also accountable for the manner in which remuneration had been managed in FY21 as MD Punit Goenka’s pay increased by 46 per cent (higher than what was approved by shareholders in the 2020 AGM), while employees were given no raise for FY21.
On Chokhani, IIAS said after completing his five-year term as an independent director, the Zee Entertainment board seeks to re-appoint him as non-executive non-independent director. Chokhani, IIAS said, was on the audit committee in FY20 and is accountable for the losses against related party transactions, which resulted in significant erosion in shareholder wealth.
Commenting on Goenka’s salary, IiAS said shareholders supported his reappointment and remuneration for five years from January 1, 2020, at the company’s 2020 AGM. IIAS had recommended voting against his reappointment on account of the weak oversight over the business, concerns over related party transactions, and other governance concerns.