Proxy Advisory says Overhaul SBI Act to suit Modern Needs

Proxy advisors are calling for an overhaul of the SBI – State Bank of India Act, 1955 under which the eponymous lender came into being. The Act should be updated to keep with the metamorphosing norms of corporate governance, 2 advisors have stated. IiAS – Institutional Investor Advisory Services said in a report on Monday that the State Bank of India (SBI) was modernising itself.

IiAS added that it was leveraging technology, enhancing the quality of disclosures in its annual report, and behaving as any leader of the market should. However, its ability to become a beacon of good corporate governance was being scuttled by the half-century old SBI Act 1955.

The Missing Facility of ‘e-voting’:

For example, SBI doesn’t offer an e-voting facility to shareholders neither do the shareholders have any say in dividend distribution or appointment of auditors. The report said that while this wasn’t to suggest that IiAS was concerned over SBI’s dividend payout levels or its auditor appointments, not offering shareholders an opportunity to vote on such matters was a violation of basic shareholder rights.

The SBI Merger:

Earlier in October, in a report reviewing proposed merger of SBI with its associate banks, proxy advisory SES – Stakeholders Empowerment Services had said that SES was of the opinion that the SBI Act, 1955 was an age old law when no one even thought of computers and e-voting facility. But, he added, with changing times the Act should have been amended and approval of shareholders sought through a shareholders’ meeting as well as e-voting. SES was of the opinion that as good governance the approval of shareholders should have been taken.

What is it that Dis empowers non-public Shareholders the most?

What really dis empowers non-public shareholders the most is calling for a shareholders meeting of SBI. The SBI Act states that shareholders can ask for a meeting on one condition – if they own 20% of SBI’s equity, which currently amounts to Rs. 40,000 cr. IiAS noted that admittedly, the 10% threshold set by Companies Act 2013 is also high however at a 20% threshold, it was virtually impossible for any investor to call a meeting.

Role of Arundhati Bhattacharya, SBI Chairman:

Under the leadership of Arundhati Bhattacharya, IiAS said praising the SBI Chairman that SBI had done what was in its control. IiAS added that the bank had embraced technology, morphed itself to become even more suitable to the current generation, and was doing what most organisations were expected to – be a good corporate citizen, communicate with investors and be transparent. But SBI’s corporate governance standards were being quelled by the SBI Act, which refused to modernise itself, the advisor added.

To release SBI from the clutches of its own charter was now incumbent upon Arundhati Bhattacharya, during her extended term. She needs to involve the government and Parliament if needed, to make the required changes. This shall be an enduring impact on the shareholders of SBI and may be her lasting legacy.