The art of cajoling the shareholders- A Case study

Shareholders are cajoled in many ways by companies. A company makes loss but it flatters its stakeholders by bonuses, huge dividends, buy backs etc. Vodafone of the UK and biggest mobile operator in the world by revenues,posted its worst ever result of a loss of around $41bn for the year 2005-06, as it is still writing off the huge premium it paid for acquiring Manessman which it acquired for around $188bn during 2001. It attempted the same during 2000 by $94bn bid but was refused by the board of the target!!!

To retain the confidence of already angered and shattered stakeholders it rewarded them with a huge dividend of around $9bn.

KPN, the telecom incumbent of the Netherlands bought back its shares during 2004 and 2005 to give a downward support to its stock price which was becoming a victim of the langushing performance by the company in its fixed line business.

Back at home, Dr Reddy's did the same thing. While the company posted a dissapointing performance for FY 2006, it announced bonus to its shareholders to retain their confidence of which it had been a victim 18 months before.