Majority shareholding often translates to direct interference in management functions. The experience of the public sector oil marketing companies calls into question the relevance of Boards.
- The Government of India has majority shareholding in the Public sector oil marketing companies in India. These companies are listed on the Stock Exchange.
- The Board comprises a mix of Executive Directors (EDs) and Non-Executive Directors (NEDs), including Independent Directors (IDs) and Nominee Directors of the concerned Ministry of the Government.
- The IDs are also appointed by the Government of India.
- Some of the critical decisions which the companies have to take from time to time, and which directly affect the profitability of the companies, are materially influenced by the Government’s representatives on the Boards of these companies.
- This is sought to be justified on the ground that the pricing of POL products has a major bearing on the economics of the common man.
Point to ponder
- In the context of the negative impact of such decisions, at the behest of the majority shareholder, how should the other Directors react?