Mumbai: TVS Group supremo Venu Srinivasan’s continuation in dual non-executive plus executive roles at flagship two-wheeler maker TVS Motor Co. Ltd has rolled into uncertain territory, with three leading proxy advisory firms recommending that shareholders vote against the resolution for his reappointment.
Two of the firms—Institutional Investor Advisory Services (IiAS) and InGovern—have also flagged the duplication of the managing director’s (MD) position in the company, with both Srinivasan and his son Sudarshan Venu holding that title. Venu was appointed MD in February 2022.
The same month, Srinivasan, who was earlier the chairman and managing director of TVS Motor, was redesignated as chairman emeritus—an honorary, non-executive role—even as he continued in the executive role of managing director. Former Jaguar Land Rover chief executive officer (CEO) Ralf Speth was appointed non-executive chairman.
The window for shareholders to vote on the resolution to reappoint Srinivasan opened on 20 February and closes on 21 March. At least three-fourths of the votes cast will need to be in Srinivasan’s favour for him to continue in his office. A rejection by shareholders could mean his exit from both the positions.
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Proxy view
The three proxy advisory firms—IiAS, InGovern and Stakeholders Empowerment Services (SES)—have said that as an MD, Srinivasan would get a vote on board matters even as he holds a non-executive position as chairman emeritus, leading to conflict.
The opinion of the proxy advisors is crucial as institutional investors—mutual funds, insurers and foreign portfolio investors—rely on these inputs for casting their vote. Domestic and foreign institutions hold more than 41% stake in TVS Motor, while the promoters control 50.27%.
“We believe that as chairperson emeritus and managing director on the board, his current role and the board hierarchy are unclear,” IiAS noted in its report, calling the two positions “inconsistent with each other.”
While an argument could be made that the voting power is not to chairman emeritus but to the executive director, “Can this argument be accepted? Can an individual be split into two personalities?” SES noted in its report. “The fact remains that Venu Srinivasan will be attending board meeting with a voting right.”
As to the duplication of the managing director role at TVS Motor, InGovern said this “raises the possibility of a dual power structure, which could impact the clarity of the chain of command.”
A spokesperson for TVS Motor said there was clear delineation of roles and responsibilities between Venu Srinivasan and Sudarshan Venu.
“Venu Srinivasan, in his capacity as chairman emeritus plays a crucial role in guiding the company, as well as he is pivotal in setting new standards in quality and innovation,” the spokesperson said, adding that his leadership was instrumental in shaping TVS Motor into a globally recognized brand.
“Sudarshan Venu has been pivotal in driving the company’s overall growth and successfully spearheaded the growth initiatives in key markets such as Africa, Asean (Association of Southeast Asian Nations) and Latin America, solidifying the company’s presence in global markets,” the spokesperson said.
Venu has now set his vision on transforming the company into a leading global mobility player, and has set in motion a global expansion of the company, both organically and inorganically, the spokesperson added.
The background
Market regulator Securities and Exchange Board of India (Sebi) has urged the top 500 listed companies by market capitalization to voluntarily split the positions of chairperson and MD/CEO for better corporate governance.
The bifurcation of the two positions was earlier made mandatory for these companies effective April 2022, but Sebi made compliance voluntary around the same time when Srinivasan was redesignated as chairman emeritus.
With a market capitalization of ₹1.08 trillion, TVS Motor is the third-most valued two-wheeler company in India behind Bajaj Auto and Eicher Motors, which sells Royal Enfield branded motorcycles.
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Shares of TVS Motor gained 0.76% to close at ₹2,266.25 on the BSE on Monday compared with a 0.46% gain in Sensex. The stock has given over 11% returns in the past one year compared to just under 2% gain in the Sensex.
