“Change is constant” is a common cliché we hear all the time.
But promoters of many listed companies having holdings less than 50% seem to be not accepting this.
Let me explain.
Once the shareholding of an owner in a publicly listed company comes below 50%, technically he or the family can remain “managers” of the company only on merit.
The other shareholders (> 51%) can topple them over if they mismanage.
There are 4 ways in which a company can be mismanaged :
- Unable to meet current clients needs (Producing results)
- Unable to do #1 profitably (Administrate)
- Unable to adapt to CHANGE i.e. the changing needs of the clients/market (keep alive the Entrepreneuring spirit)
- Unable to keep the stakeholder “integrated” towards the mission of the company
I have observed that the Promoter Managements manage to be in the good books of the Majority Shareholders by addressing #1 and #2. While running the current show, they stop all change (#3) because they know that they will be forgiven for it.
In India, the majority shareholders seem to have been quite benevolent till now. Sometimes they have no choice but to be so.
But now things are changing. These shareholders seem to be getting aggressive.
After a lot of patience, Institutional shareholders CAN lead a “revolt” in at least two ways :
- Take over the management, displacing the Promoter managers
- Sell the company to a strategic investor
My prediction is that they WILL.
Promoters of listed companies have managed to LIVE IN DENIAL till now. The question is “HOW LONG?”
