HUL’s unusual promise was our contract with our new CEO

Few small shareholders delve into the legal language of corporate mail-in ballots unless they realize that the resolution could change the fate of the organization and the value of their investments. The long emails describing electronic voting procedures from the company secretary often lie unread in the inbox.An August notice from Hindustan Unilever Limited (HUL), calling on shareholders to participate in the electronic vote to approve Priya Nair’s appointment and remuneration, was a simple formality to legally sanction a decision that was celebrated by the business community and widely reported in the media. In July, HUL had announced Ms Nair, a Lever-lifer, as its new CEO. Ms Nair, a member of the Unilever Leadership Executive, is the first woman CEO and managing director of HUL.

The usual notice, which follows the regular templates that corporate legal departments adhere to, would have been lost like many others. But that didn’t happen. A few die-hard shareholders who took the time to read through the eleven pages – whether for academic reasons, vicarious pleasure or out of sheer curiosity – came across one line that stood out: the FMCG giant, with revenues of just under $7 billion, was willing to share a copy of the new CEO’s agreement with shareholders.No law requires a publicly traded company to do this. Indeed, no company does that. However, shareholders who insist on examining the document may visit the head office at a prescribed time to review it. The HUL notice goes further than that.

It reads: “Electronic copy of the draft agreement between the Company and Ms. Priya Nair containing terms and conditions and other documents relating to this subject matter will be available for inspection. The members may obtain a copy of the same by writing to the Company at levercare.shareholder@unilever.com quoting their name, folio number / customer ID and DP ID, with a self-attested copy of their PAN card attached to the email.”

Document sharing rules vary by jurisdiction. For example, US listed companies share most material documents, sometimes redacting sensitive portions. Some Indian companies share important documents with board members that they can view on i-pads without having the option to download or print them. If you email a copy or allow a printout, you run the risk of a document, intended to remain in a closed system, being leaked or widely distributed on WhatsApp. Legal views on this subject vary. According to Jayesh H, co-founder of law firm JurisCorp, “It is unusual to say the least to claim that shareholders can obtain a copy of such a document by email. Because most companies prevent shareholders from even physically inspecting sensitive documents. Unless the company shares a copy, it should clarify. This all raises a different and bigger question. In an era of hyper-competition, should shareholders even be offered access to such documents? Time to do away with this as part of Ease or Doing Business?” However, Puneet Shah, partner of RegFin Legal, another law firm, said: “Under Section 190 of the Companies Act, 2013, every listed company is required to maintain at its registered office a copy of the service contract entered into with its Managing Director or Whole-Time Director.

This contract must be available for inspection free of charge by every shareholder. It is further mandatory to provide a copy of the contract to any member who requests it, upon payment of the prescribed fees. If the contract or memorandum of terms of appointment is referred to in the explanatory notes to a notice convening a general meeting or to a postal vote, the company is obliged to make it available to shareholders who request it, thus reinforcing the principles of transparency and accountability in director appointments.”

When asked whether a shareholder has requested the copy of the agreement and whether the company has shared it with any member, a HUL spokesperson said: “The company continues to make the relevant documents available for inspection to shareholders in accordance with the procedure set out in the Companies Act, 2013, and the rules made thereunder. We continue to provide services and respond to shareholder requests, directly and/or through RTA (Registrar and Transfer Agent), from time to time.”