Question:

Would you call rainbow a shareholders activist group? why?

Shareholder case study

itwasalmostlikeacolegereunion,thoughatotalyunexpected,unplannedand unforeseenone.Thesevenfriendsmetafterfifteenyearswithnoideathattheywere goingtomeeteachotheratthisspotandhavesuchanimportantcommongroundto talkabout. Rasheed,Afzal,Iqbal,Naseem,Basit,OmarandWahidwereinthesameclassat Hailey'sColegeofCommerceLahore'sBCombatchthatgraduatedin1984.Theyal passedwithflyingcolorsandwentbacktotheirhometowns,exceptBasitwhowas fromLahore.Theyremainedintouchforashortwhilebutgradualylostcontactwith eachother.Andnow,alofsuddenalsevenofthemmetatthismeetingwhich connectedthemwithacommoncause.Whentheywereatcolegetheyusedtobeveryclosefriends.Infacttheywereso closethattheyhadcoinedanamefortheirgroup:RAINBOW.Thishadbeencleverly thoughtofbyWahidwhowasthepoetictypeamongthegroup.RAINBOWcarriedthe initialsofa lthesevenfriendsandalsoreflectedthecauseoftheirassociation.They werefriends,buteachhadhisownpersonality(orcolors).Rasheedhadjoinedan investmentbankaftergraduationandwasnowExecutiveVicePresidentwith responsibilitiesforinvestmentsinequities.Afzalhadjoinedhisfather'sfamilybusinessin Faisalabad,aspinningmil.However,recentlyhisfamilyhadacquiredasignificant interestinachemicalscompany,thoughtheirholdingwasnotsufficienttogetaperson electedonthatcompany'sboard.Iqbalwasnowworkingwithabrokeragefirmbased inKarachithatspecializedinissuinganalysisreportsonthefinancialperformanceand positionofquotedcompanies.Healsodidsomeinvestmentinsharesonhisown account.Naseemworkedinanewspaperandwasitsbusinesseditor.Hetoohad considerableinterestinfinancialreportsoflistedcompaniesandpersonalyheldsome sharesincertaincompanies.BasitwasnowadirectorwithChaudharyChemicalsLtd, oneofthemajorchemicalcompaniesinthecountryspecializinginproductionof variousindustrialandhouseholdusechemicals.Hisfamilyowned52%ofthesharesof CCL,hisfatherwasthechairmanwhileBasitservedasDirectorFinanceandchairman ofitsAuditCommittee.Omarwasworkingforaninsurancecompanythatowned7.2% oftheissuedsharesofCCL.AsGeneralManagerFinanceoftheinsurancecompany, hewaslookingafteritsinvestments,particularlyinlistedcompanies.Wahid,thepoet amongthegroup,hadnorealinterestinthingslikeinvestmentsorshares.However,he hadcometothismeetingasaproxyofhiscousinwhoheld1.8%oftheissuedsharesof CCL.Itwasnocoincidencethatthiscousinwashisemployerwhowasrunningafairly popularbusinessmagazinefromIslamabad.Thefriendsmetafterfifteenyears,attheannualgeneralmeetingoftheshareholdersof ChaudharyChemicalsLtdheldinLahoreon22March2010toconsidertheannual financialstatementsfortheyearended31December2009.Forsomereason,the chairmanofthecompany,Basit'sfather,washeldupelsewhere.ThisdelayedtheAGM andalsoprovidedanopportunitytooldfriendstohavearealyfriendlychitchat.Basit toldthefriendsthathisfatherwasrunningCCLinanautocraticandoldfashionedway, whichinhisopinion,washamperingthegrowthofthecompany.Inhiswords,"my fatherissacrificinglongtermbenefitsforthesakeofpettyimmediatebenefits".Basit wantedatrulycorporatecultureatthecompanywhichhefeltcouldcomeonlyif therewereprofessional,trulyindependentnon-executivedirectorsontheboard.This wassomethinghisfatherwouldneverlethappen.Thefriendsjustsmiled.Theyrealizedthatbetweenthesixofthem(i.e.excludingBasit) theyhadenoughvotestoputanomineeontheboardofthecompany.Atthesame time,RasheedandOmarpromisedthattheywilgettheirrespectiveemployers(the investmentbankandinsurancecompany)toexertpressureonCCLboardtoimprove itsgovernance.AfzalofferedtogradualyincreasehisshareholdinginCCLandtotryto becomeavocalshareholderandmaybearegulardirectoronitsboard.Iqbal, NaseemandWahidundertooktousetheirpensforbringingaboutapositivechangein theconductofCCL'sboard.