YES Bank -- Red Flag!

From the Economic Times a few days ago ---

Shagun Kapur Gogia can't succeed her father on the board: YES Bank to Bombay High Court

RanaKapoor-led YES BankBSE 1.28 % on Monday told the Bombay High Court that only a living person has the right to nominate directors, in response to the plea filed by MadhuKapur.

The Kapur family had moved court to establish its claim as an equal business partner to MD and Chief Executive Rana Kapoor. The court will now hear the case on Friday, as the bank's lawyers sought more time to amend their petition.

"The bank is not willing to recognise Shagun Kapur Gogia as the Indian partner after the death of her father Ashok Kapur. This is the point of contention," said a person following the court tussle.

Usually, as minority shareholders, we do not pontificate on all matters however, this is something that caught our attention.

a.    A stock holder is a part owner of the business. A stock is not a piece of paper but part ownership in a business. Shagun Kapur owns about 12% of the stock. She own one-eighth of the bank. One-eighth of every branch, every loan, every deposit belongs to her (net of liabilities)

b.    If a person who owns one-eighth of the bank does not get a voice in the board, who does?

c.    Part of the duty of the board is to protect and shepherd the management towards returning value to shareholders. If big owners are not part of the board and not heard to, where does that leave small minority shareholders?

d.    What is the purpose of the bank if not working for the shareholders?

e.    Apart from Rana Kapoor, who owns a chunk of the shares, what is the incentive for the other directors to take the right decisions for the shareholders? Are they there to protect their jobs or that of the shareholders?