IIAS asks shareholders to vote against directors of Zee Entertainment

Proxy advisory firm IIAS has raised fresh corporate governance concerns at Zee Entertainment by asking the shareholders not to re-appoint independent directors, Ashok Kurien and Manish Chokhani, on the company’s board.

Early this week, Dish TV 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 patriach Subhash Chandra’s brother.

Meanwhile, two other proxy advisory firms — Stakeholders Empowerment Services (SES) and Institutional Shareholders Services (ISS) — have advised shareholders to vote for the election of both directors.

“The mentioned proxy advisor has recommended a vote against the reappointments of certain Nomination & Remuneration Committee (NRC) members in their report dated 1st September 2021. The company’s response is also mentioned in the same report. The company further reiterates that the NRC has finalised the overall remuneration framework, after a structured evaluation process and has implemented the same with the approval of the Board. Other credible proxy advisors, including certain reputed international firms, have recommended to vote in support of the appointment of the said NRC members,” said a Zee spokesperson.

Asking the shareholders to vote against the proposal to re-appoint Ashok Kurien on Zee Entertainment board, IIAS said he is the founder of the Zee group and while the company has reclassified him as non-promoter, no requisite regulatory filings or shareholder approval was sought for the same, and hence it classifies him as a promoter. “He 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 said, adding that the promoter equity declined to 3.99% as on June 30, 2021. “We believe the board must bring in the right mix of professionals that 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.

IIAS said as a member of the NRC, Kurien was also accountable for the manner in which remuneration had been managed in FY21 as MD Punit Goenka’s remuneration increased by 46 per cent (higher than what was approved by shareholders in the 2020 AGM), while employees were given no raise for FY21.

Commenting on Manish Chokhani, former CEO of Enam Securities and former chairperson of TPG Growth in India, IIAS said after completing his five-year term as 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 on account of related party transactions, which resulted in a significant erosion in shareholder wealth. As a member of the NRC, he is accountable for not professionalising the board, especially given that promoter equity has declined to less than 5 per cent. He is also accountable for the failure to address and adequately deal with governance concerns that led to the resignation of independent directors in the past, it said.

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. “While estimating the proposed remuneration for Goenka, Zee’s management had confirmed that he had taken a voluntary pay cut of 20% in his fixed salary from April 2021. Based on this, IIAS had estimated his FY21 remuneration at Rs 5.65 crore against his FY20 remuneration of Rs 6.81 crore. In FY21, Goenka’s remuneration totalled Rs 1.31 crore, which did not include any variable pay. The board decided to revise Punit Goenka’s remuneration after undertaking a benchmarking exercise by a global consulting company. Employees, on the other hand, were give no increase in FY21.”

Shareholders are advised that Goenka’s revised remuneration is higher than the terms approved in the 2020 AGM. Further, the increase in remuneration contradicts the company’s assertion that Punit Goenka had taken a 20 per cent pay cut, IIAS said. Business Standard