66 resolutions defeated by shareholders in last three years

Push by regulators forcing institutions to assert themselves, says IiAS

Minority shareholders have defeated at least 66 resolutions in the last three years. This has coincided with the new Companies Act and corresponding changes brought in by regulators that have empowered the shareholders. Other convenience measures such as e-voting have also helped.

While the number of rejected resolutions was high in 2014 at over 30, it has stabilized around a dozen defeated resolutions, every year, according to numbers collated by proxy advisory firm Institutional Investor Advisory Services (IiAS).

"This is largely attributable to recent changes in the governance framework in India which have empowered shareholders by providing them a greater say on critical corporate matters. Regulators are also mandating investors to vote," IiAS said in a report.

Further, with the advent of e-voting, not only has it become easier to vote, but the way voted are counted has also changed to the actual number of shares voted, rather than the show of hands — this results in more effective participation.

In companies where resolutions have been defeated, the median institutional shareholding was 28%, as compared to the NIFTY 500 median institutional shareholding of 22%. Institutions are actively voting — the abstained votes for mutual funds and pension funds have dropped significantly to 11% in FY17 from 24% in FY14.

This is driven by the push by regulators towards a stewardship code and enhanced disclosures on voting patterns and rationale — Sebi did so in 2011, PFRDA in 2015 and IRDA earlier this year.

FII participation continues to remain high with top FIIs exercising their full franchisee in all their investee companies.

Related party transactions present more sensitivity to the shareholder voice, because the promoters cannot vote to sway the decision on these transactions.

But the data shows that other classes of resolutions are also getting defeated. In 19 out of the 66 cases, promoters have voted out resolutions presented by the board-which could mean a possible difference of opinion between the two parties. Continuing differences like these could have material implications, IiAS said asking companies to provide more clarity on the diverse set of opinions at the time of publishing the voting results.