- Minority shareholders: These are often the very reason for a listing, and to ensure liquidity in trading, Indian stock exchanges mandate a minimum 25% free float i.e promoter shareholding capped at 75%. Not coincidently. key corporate actions in India require a special majority i.e 76% of shareholders to approve matters, but since this % is calculated on those shareholders present and voting, 75% or a much lower shareholding is often enough in practice. That said, minority shareholders have a veto on certain related party transactions and actions, so one cannot ignore them.
- Periodic reporting: Quarterly reports in addition to annual reports, within the stipulated timeline of 45 days/60 days
- Internal Financial Controls certification: For listed companies, there is a CXO level certification with stringent penal liabilities if proved wrong. Hence, the demand for a robust finance controller who can keep the CXO from jail
- Voluminous disclosures/ Multiplying non financial reporting Be it CSR, ESG, BRR, IND-AS, IFRS..listed companies are often the first guinea pigs of financial and non financial reporting since they are public interest entities. This can prove a burden to report all this.
- Independent Directors/Audit Committees: For listed companies, there are mandates to have a certain proportion of independent directors, over and above that stipulated by the Companies Act 2013. These additional stakeholders bring new perspectives, but could also challenge management in a manner not to the former's liking
Why do I single out the finance function here? While all functions experience a (hopefully) more stringent control environment, it is the finance and legal functions whose stewardship role increases here. The difference being clear (hopefully), let us now see why a listed company would be preferable to a finance professional, and why sometimes it may not. Firstly the pros
- Independent Audit Committee (in theory)
- Better controls
- Multiple audits/certifications
- Multiple professional interactions
- Exposure to handling minority interests
- Investor Relations: This is a unique role in public traded companies, since even private equity companies would have more of internal MIS than an extensive IR engagement. Preparing IR decks, financial press releases, stakeholder mapping
- AGM/EGM: This is a JV between Finance and Secretarial functions, however every finance professional should get involved in the preparation for an AGM of a listed company atleast once so that they appreciate the extent of background effort
- Strategic disclosure drafting:Strike a balance between disclosing more to please investors and win awards, versus revealing business model insights.
The cons however could be
- Non value adding work: Be it reviewing an annual report for the nth time before review despite the knowledge that it will likely not be read by even 0.1% of investors, getting backup certifications/attestations for the comfort of independent board members
- Disclosure overdose: Not all reporting is likely to help investors(eg BRR) but is mandated and wastes man-months in its preparation
- Potential Legal Liability: If you are a victim of management override(possible if other functions have 'promoter appointed' people-like a 'Lala company'), you are still presumed to be culpable unless due diligence is proven:
- Dealing with controlling shareholder-ethics: The controlling shareholder/management is the on
- Hierarchial/Ladder-Big company woes: Listed companies usually tend to be large profitable entities (when initially listed atleast). So the issues of
Overall, it is for one to map their stage of career, aspirations