Aditi Sharma 201103

The small shareholder director is only one of those on the board, and his or her vote has no
impact on the outcome of a board decision. Such a director would have access to information
presented to the board, and may express his or her opinions and try to persuade other
directors on issues under discussion, but he or she would not be able to veto any decision. To
that degree, the importance of such a position is to ensure that the voices of different
stakeholders (including the electorate of small shareholders) are heard and that board
decision-making is more transparent. More significantly, while the small shareholder director
is an effective tool for protecting “small” shareholders, it should be used with diligence to
ensure that the position is not exploited by one or more large institutional investors with a
grudge against management or promoters. Small shareholders may end up being used as
pawns in larger corporate fights between groups of powerful shareholders if proper checks
and balances are not in place (such as a large institutional investor and the promoters). This
will end up jeopardising rather than defending the rights of passive retail shareholders, which
is why the small shareholder director was named in the first place.

Rohit Dhanuka 201142

Section 151 of the Companies Act of 2013 was enacted in favour of minority shareholders,
with the intention of acknowledging their value on the board of directors. Getting small
shareholders on the board of directors is very helpful to the company because they are the
company's owners and therefore have a greater motivation to work for the company's success.
Furthermore, having shareholders on the board of directors will increase shareholder interest
because more investors will be able to participate in a business where they have both equity
and power. As a result, having both ownership and control in the same body will not be
detrimental to the company; rather, it will be advantageous because the shareholders, who
have placed everything on the line, will have a strong incentive to work for the company's
benefit.

Vandan Gohil 201159

The shareholders will finally claim their power as "the owners of the company to improve its
productivity" with the appointment of small shareholder directors. Getting any power over
the board would affect not only the company's actions but also a wide variety of activities. It
would also assist in the company's governance, ensuring that all shareholders are treated
equally, and increasing the company's value over time. As a result, the organisation would
benefit from strengthened regulatory conditions, shareholder democracy, and enhanced
shareholder engagement. Another explanation for the possible need for small shareholder
representation in the board of directors is that if the majority of directors do not behave in the
company's best interests, the shareholders, as owners of the company, will lift their voice
against it through the director appointed by them under section 151 of the Companies Act,
2013. However, no business today wants to give a seat to the company's small shareholders.
The main explanation for this is to keep ownership and power apart. This can be seen in the
case of Alembic Limited, where a group of small shareholders, employees of a company
called Unifi, decided to seek a seat on the board of directors, essentially making their stock
ownership passive.