“Beggars cannot be choosers” some great man said. However, the unfortunate aspect is that investors who choose to invest in stocks are being short-changed and treated as “beggars” by some managements.
Fortunately, the shareholders are not taking this shoddy treatment lying down and are instead rallying to combat the injustice.
We saw a few days ago how the shareholders of Tata Consultancy Service (TCS) revolted and protested vehemently at the fact that N. Chandrashekaran, the CEO, had demanded a handsome salary even though the shareholders are living a hand-to-mouth existence owing to the poor performance of the stock on the bourses.
We also saw the inspiring story of how the petty shareholders of Ricoh India have rallied under the dynamic leadership of Kalpraj Dharmashi, the veteran value investor, to bring the unscrupulous management of the company to book.
Now, it is the turn of Billionaire Cyrus Mistry, the Chairman of Tata Motors, to face the heat and get an earful from the beleaguered shareholders of the Company.
Cyrus Mistry has carefully cultivated the image that he is an “aam aadmi” at heart despite the billions under his belt. One endearing image is of his sitting cross-legged on a charpoy in a Dhaba and heartily tucking into local delicacies with his driver for company.
Tata Group Chairman Cyrus Mistry having Lunch at Local Dhaba with a Driver. #TataSteelCity #Jamshedpur #Jharkhand pic.twitter.com/tQbDCI6WJf
— Phani Mahto (@Phani_Mahto) May 16, 2016
However, some of the sheen came off when Cyrus Mistry announced to a packed audience of loyal shareholders of Tata Motors that the Company would pay a princely dividend of 20 paisa for FY 2015-16.
There was pin-drop silence for a few moments as the distinguished audience was too shell-shocked to react.
When the shareholders came to their wits, they gave Cyrus Mistry a piece of their mind.
“This dividend is nothing. Even beggars these days don’t accept anything less than a rupee” an octogenarian shareholder wept.
Another geriatric shareholder lamented that the Company could afford to pay tens of crore to star footballer Lionel Messi to be the brand ambassador but could only spare loose change for the shareholders.
At this stage, Cyrus Mistry gave a glimpse of his brilliant tactical thinking ability. He knew that if he adopted a belligerent stance, he would alienate the shareholders and they could rough him up. So, he instead adopted a conciliatory tone and empathized with them.
“I am pained for not being able to give the rightful dividend. My personal belief is that it’s a bad day for the company. I feel extremely unfortunate this day. Let me tell you it does not give me any pleasure to deny your rightful dividend. I know that many of you depend a lot on the dividend,” Mistry said in a soothing tone.
Then, in a deft manoeuvre, the wily Billionaire turned the tables around and made it appear as if the shareholders had to be grateful for the little that they got.
“The company is going through extremely challenging times, facing intense competition and a changing regulatory regime” Mistry said with a chill in his tone.
He also gave shareholders an ultimatum that they have to learn to be patient and not clamour for dividends:
“The journey is going to be long and not going to be there for the faint-hearted. So ladies and gentlemen, if you want to be shareholders of this company, don’t expect something which is going to be instant gratification, expect to be there on a long-term journey, expect to stand by this company, because this company will perform, but it will not turn around absolutely tomorrow”.
Cyrus Mistry’s brilliant tactic of firm diplomacy checkmated and mollified the shareholders. They shuffled out of the AGM feeling grateful that they have at least received a dividend of 20 paisa despite all the trials and tribulations that their Company is going through!
Why to blame only Cyrus Mistry, the Chairman of Tata Motors? What did the entire Reliance group (both wings) given for retail investors? Right from the beginning of Rel Power, the investors those who rolls their brain knows the reliance group is not interested in poor retail investors, rather they are keen on making bunglows for themselves and making luxuries for their families only!!!
I have mentioned about this in other comments also.
I am sure Tata group will come up with good returns in future
Reliance promoters suffer from an obsessive compulsive disorder of going into big time projects, irrespective of whether it will be beneficial to the shareholders. From the past twenty years the company has ventured into such diverse projects that it is impossible to ascertain which business it is good for shareholders. Just look at the various businesses the company is in You name a business, they are into it. Textiles, Chemicals, petroleum, oil and gas exploration and production, shipping, domestic trading, international trading, grocery retailing, vegetables retailing, footwear, jewellery, lifestyle retailing, telecom, hospitals, treasury management, ship building, defence manufacturing, power plants, power distribution, power trading, cement manufacturing, you imagine any line of business, they are into it. In short they are jack of all trades. Now we hear they are closing down the Jewellery retailing business. How many further businesses will be closed? And what hit will the shareholder take. Now going forward after Jio, just wait and watch, the company will be even more crazy for growth. Next will be takeover of some Fortune 500 company. It will be world record beating trillion dollar thing. Bank borrowing will soar from 2 lakh crore to 20 lakh crore. Making a fool of the shareholder. No wonder mutual funds stay away from this jack of all trades company. And no wonder such a company which revels in saying “world class” in all aspects of its business gets only 12 PE. No wonder just one company of the Tatas, TCS is worth 1 lakh crores more than the market cap of all Reliance Group companies of both brothers put together.
Better they start Scrap picking business and will benefit for themselves
Ridiculous management
Not only reliance.most indian companies treat sharehoders like
shit.dividends are pathetic.but
they give themselves and cronied
fabulous salaries,perks.Sebi is a
mute spectator
Well, Cyrus said that the ride is not for the faint hearted and the company will not turn around instantly. I think this means multiple years with pathetic dividends at least. This is yet another corporate entity like Reliance. They are into mining, basic fabrication ( there are shovels of Tata brand), autos, cars and heavy vehicles, infotech, jewellery retailing, eyewear, watches, salt, and have now started marketing pulses and spices. The dividends of Tata group companies used to be good once upon a time. Now almost everything they sell is mediocre, just look at Tata cars.
These big corporates are interested only to use share holders easy money for their own benefit .
When Mr Jaitley had announced in last budget a dividend tax on large dividends (affecting the promoters mainly or large investors), I had commented on another page of this forum that the companies will pay maximum interim dividend before 31 March 2016, but will avoid paying a bigger final dividend. That is coming true now. Since long term capital gains are tax exempt, and that the highly liquid markets are taking stock prices higher, these promoters and big investors can liquidate a part of their stocks to compensate for the dividends that they would not get due to this ‘crazily levied tax avoidance strategy’. I believe that the company has to justify the non-payment of dividends by showing a better return on investments (made through retention of profits not paid out as dividends).
Coming to Mistry and other CEOs resorting to this tactic, thereby depriving small investors their due, it is very important for any shareholder attending these meetings to insist on a reduction in the management salaries if the management feels the company is going through any trouble. Or ask their resignations if they cannot perform and if they feel the company is going through a bad time. What purpose a CEO is there for? or a CFO, COO etc? If they cannot manage a company in bad times (if any), then what is the use of their existence?
The dividends were not high even before this tax that you mention.