SES queries Sanofi board composition
Asks how a former RBI deputy governor sits with erstwhile brass of Kingfisher Airlines
Stakeholders’ Empowerment Services (SES) has raised concern over the board composition at Sanofi India, where two former Kingfisher Airlines directors, A K Ravi Nedungadi and Subash Gupte, are serving as independent directors along with former Reserve Bank (RBI) deputy governor Usha Thorat.
“SES reiterates, “said the corporate governance analyst entity, “that there is no legal violation as far as board members are concerned. However, shareholders would be interested to know the boardroom chemistry between an ex-regulator (Thorat) and an exdirector of a company declared a wilful defaulter.”
It said so in a note issued ahead of the pharmaceutical major's annual general meeting on Friday.
Kingfisher Airlines (KFA) was declared a willful defaulter by several banks after being grounded in October 2012. Its promoter, Vijay Mallya, is facing several proceedings, including one to extradite him from Britain. Nedungadi, a director of KFA till April 2014, was associated with various Mallya businesses since the 1990s. Gupte, a former Air India chairman, was vicechairman of KFA before resigning in 2014. In September 2014, United Bank of India had named all three as willful defaulters.
Thorat was deputy governor of RBI between 2005 and 2010. She joined the Sanofi board in April last year.
SES stated: “If she is with the decision of the banking sector, then she faces the dilemma of being part of a board which has two wilful defaulters as members. If she is not supporting the decision of the banking sector, it amounts to an indirect message that these people are not wilful defaulters. That would imply that RBI and other commercial banks are on the wrong side and she does not support their point of view. This again poses an ethical dilemma for her, as she is taking a stand which is in contradiction to a stand she would have taken as a regulator herself. Can we take this as highest standards of objectivity or professional independence?”
Responding to an e-mail seeking comments, a Sanofi spokesperson said Gupte and Nedungadi “have been elected as Independent Directors by the shareholders in accordance with the provisions of the Companies Act, 2013, and the Listing Regulations prescribed by Sebi (the markets regulator).”
Adding: “The fact that neither of the two have been declared willful defaulters by any court and, further, that the Company has received declarations by them to the effect that they are not disqualified to act as Directors, clearly negates the questions that the SES report raises regarding their position in the board of Sanofi India.”
Further, on a resolution where Sanofi is seeking shareholder approval for related party transactions (RPT) up to a limit of ?2,000 crore every financial year, for perpetuity, SES recommended a vote against. Saying: “Such resolutions with perpetual approval provide unfettered power to the board of directors, even if the company’s business scenario changes in future.” As a good governance practice, a company must take such approval of the shareholders on a yearly or periodical basis, it said, keeping in mind the dynamics of a business.
On this, the company spokesperson noted the Companies Act and the Sebi (Listing Obligations & Disclosure Requirements) Regulations, 2015, do not require annual approval for such transactions from shareholders. “Therefore, with regard to routine business transactions of import and export of pharmaceutical products with the parent company, Sanofi India exercises diligence to be compliant with all the applicable regulations and has the support of all its investors,” she said.