Invesco's Open Letter to Zee Shareholders: Check Major Points

Zee Entertainment's largest stakeholder, Invesco Developing Markets Fund, which owns approximately 18 percent of the company, issued an open letter to Zee shareholders on October 11 highlighting the urgent need for independent voices on the company's Board of Directors.

"We are disappointed that the leadership of Zee has resorted to a hazardous public relations effort in response to the overwhelming demand from shareholders for leadership changes at Zee," Invesco wrote in the letter.

The letter went on to say, "These actions and rhetoric are aimed at avoiding true accountability for the governance lapses and shareholder value destruction that the current leadership and Board have presided over. We are calling on Zee shareholders to join us in asking why the founding family, which holds under 4% of the company's shares, should benefit at the expense of the investors who hold the remaining 96%."

Invesco's letter to shareholders, according to an official release, makes the following claims:

• Indian stock market indices had more than doubled in the preceding five years on the eve of Invesco's EGM requisition on September 11, 2021, but Zee's stock had more than halved in the same period.
• Weak governance and a permissive Board have permitted Zee's growing involvement with the financial hardship of the founding family.
• Weak governance and a permissive Board have enabled Zee's growing entanglement with the financial anguish of the founding family. Zee has suffered significant reputational damage as well as regulatory criticism as a result of this.
• Zee's management and board have gone to considerable lengths since the EGM demand to deny a basic shareholder entitlement guaranteed in Indian law. The founding family of Zee has embarked on a rash and frantic public relations campaign to divert attention away from the company's basic concerns.
• Between the promoter family and the institution, Zee requires a line of demarcation. Its Board of Directors has to be strengthened with independent directors who take their jobs seriously, debate important decisions vigorously, and protect all shareholder interests.
• On its own, a better-governed Zee would be far more beneficial. Strategic alliances that help establish a stronger media platform, on the other hand, are welcomed.
• It's troubling that the current terms of the Sony-Zee agreement give the original family an additional 2% equity ownership via an unjustifiable non-compete, while also allowing a mechanism for the founding family to increase its stake from 4% to 20% via means that remain completely unknown. If and when complete details are made available, each transaction will be examined constructively.
• Zee may be guided into a healthy future by a Board that has been strengthened with independent voices, which can deliberate and decide on its leadership structure and provide a framework for the equitable consideration of any potential strategic alignments.