Not such a fair wind for Fowle

Not such a fair wind for Fowle

Nostromo Research

London July 30 2004

Photographs of the AGM & demonstration can be viewed here

The name, in Hindi, means "the end of knowledge". Yesterday it was more like the end of proper understanding, as Vedanta held its first annual general meeting (AGM) in London.

First, the company was nearly hoisted by its own petards. Two directors up for re-election didn't attend; one with the feeble excuse that he had another meeting in Pune the following day.

Then, chairman Michael Fowle admitted he shouldn't after all be chair - though whether of the audit committee or the company, was left to speculation. UK corporate best practice states clearly that you shouldn't head a company, while also in charge of assessing its governance But then Vedanta's corporate governance director, Mr Chandra, was already on that plane to Pune.

Worse, the company hadn't issued a health safety and environment report. Was there one? asked a canny shareholder. Well,there was an HSE committee and it had made a report but it wasn't worth publishing - just wait for another year. In any case, said Fowle, most HSE issues relate to Sterlite and it has its own system of reporting back home. In other words, you pays your money in London, while the tune is called in India.

Such insufferable complacency was very much the theme of Fowle's responses to protests from nearly half the non-staff shareholders present. Half? According to Vedanta's PR spokeswoman, of the thirty or so attenders at the meeting, a third was staff, another third represented investment institutions and the rest were shareholders. This means that the half dozen dissidents who entered the meeting on single votes may have comprised around fifty per cent of the AGM's voting caucus.

Not that this mattered one wit of course, since Anil Agarwal, architect of Sterlite Industries and Vedanta's CEO has, along with his kith and kin, more than enough shares to take the company to war on Pakistan if he chose, and without consulting anyone else.

Sterlite has been notorious in India since it was set up in the late eighties. Vedanta, its holding company has carried on the tradition. Its shares have lost around a third of their value since the launch last December. And the lack lustre performance was reflected in yesterday's reelection of directors. Nearly half a million votes opposed Agarwal himself. But, more surprising and indicative, it was Chandra who suffered the most damning inductment; nearly a fifth of the total number of votes going against him. According to the Financial Times the thumbs down probably came from US hedge fund, Ospraie, one of the largest "hidden" investors in Vedanta.

Two shareholders raised meek and meagre questions about the company's performance. But the floor was dominated by the dissidents - drawn from four UK NGOs. They were especially concerned about Vedanta's construction of a huger alumina refinery on tribal land in Orissa, and the blasting of the region's most sacred mountain, Nyamgiri, to provide the bauxite feed stock. Although the protestors were well-backed by personal knowledge of the area and its people, their testimony seemed hardly to ruffle the board. Fowle's persistent retort was: we get the permissions we need from the Indian states and central government and then we go ahead.

Such claims proved threadbare twenty years ago. Its a refrain from which the big extractive companies now - well, refrain, knowing that local jurisdictions are often corrupt or inadequate in oversight. But Vedanta doesn't care about best practice or, apparently, most of the principles to which other London resource majors, such as BHPBilliton, BP and Rio Tinto, claim to adhere.

Operations at Sterlite's most controversial and deadly single venture - the Tuticorin smelter also came briefly under the spotlight. Had the company expanded the plant without getting proper permission from the Tamil Nadu Polution Control Board, as local activists claimed this week? No sir, came Fowle's answer (with a placid Agarwal briefly nodding assent) - we've got that permit. And would the smelter release its huge burden of wastes from the site into the environment, as local people have consistently feared - and as indeed it was doing until recently? No sir, absolutely not!

Ironically the AGM took place at a leading London marine institute - ironic because the Tuticorin smelter was sited, in flat contravention of regulations, only a few kilometers from one of southern Asia's most precious biosphere reserves, the Gulf of Mannar. Although the directors slipped in through the back entrance, other attenders had to pass through a colourful picket, held on behalf of the local communities already damaged by the Orissa alumina project and now threatened even further by Sterlite/Vedanta's plans.

We can be sure that it won't be last demonstration that Vedanta or its complacent investors have to suffer.