Mutual funds as conscience keepers!

So SEBI has one more work for mutual funds. They are supposed to be the conscience keepers for corporate India. Good news.

Next they may be asked to get a ‘good behavior’ certificate from unit holders – saying I will redeem them only for legitimate purposes. I will not use the proceeds for buying a gift for my girl friend / mistress / ex-wife / future-wife…:). It is quite amazing.

What is a mutual fund supposed to do? Suppose it has to invest in a media company – should it ask:

– Why do you not have an independent board (in India an independent media company is a joke) most of them are big businesses and some make more money from rent than from advertisements.

– what happens if they know that one company paid a bribe of Rs. 25,000 to an octroi clerk because of some documentation mistakes. Should they sell the shares? (Well a company which talks all day about corporate governance did it long ago)

– if they find out that a politician holds shares in a company in which they are investing (and that the shares were given as a part of a bigger bribe to clear a loan or a project?) -Should they sell the shares?

Just attending the meeting and voting (and Menaka Doshi and her sisters asking in a shrill voice – ‘Why did you allow the company to build a jetty in Orissa and endanger our turtles’ ) I really pity the fund manager. He has one more job to do. I have no clue whether all this will add to the overall returns. Nor do I know whether the media persons (or the SEBI employees) invest in mutual funds. That of course is a different story, is it not?

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