Proportion of mutual fund votes against resolutions is at a multi-year low

Some say companies more willing to discuss resolutions with shareholders before they are brought to vote

Swraj Paul’s sweeping moves to snap up shares in Indian companies and ‘clean them up’ in the 1980s were some of the rare occasions where promoters had reason to fear their shareholders in India.
 
However, more than three decades later, the scenario is quite different.
 
Now, large institutional players are less likely to rock a company’s boat single-handedly.
 
The introduction of disclosures on how mutual funds (MFs) voted as well as entry of proxy advisory firms, who could advise them on resolutions, were expected to help bring together opposition against unscrupulous promoters and resolutions that might not be entirely in the interests of common shareholders. 
 
However, an analysis of 58,243 resolutions for 2017-18 showed that MFs are opposing a lower proportion of resolutions today than they were earlier. This is based on records collated by corporate-tracker Prime Database (nseinfobase.com).
 
In fact, the proportion of MF votes against resolutions is at a multi-year low, according to data. They voted against only 2.32 per cent of the resolutions in 2017-18. This is little more than half of the 4.48 per cent ‘against votes’ cast in 2014-15.

 
MFs voted in favour of 50,687 resolutions in 2017-18, or over 85 per cent of them. This is not to say that there has been no change.
 
Amit Tandon, founder and managing director of Institutional Investor Advisory Services India (IIAS), said that abstentions are also an important indicator of fund manager activity.
 
“This is where things have improved," said Amit Tandon.
 
Abstentions have gone down to 10.63 per cent from 21.05 per cent in FY15. And fund managers say that the fall in votes against resolutions is a consequence of changed promoter behavior.
 
A fund manager at one of the top-five mutual funds said that promoters are now more willing to talk with fund managers. There is an exchange of views before resolutions are put to the vote to gauge reactions and changes are made accordingly.
 
“Earlier there was no dialogue,” he said. The chief investment officer at another top fund-house said the same.
 
“Companies are not making changes which would attract activism,” he said.  There were 11 instances of schemes of arrangement, involving amalgamations or restructuring in FY18. Mutual funds voted against every one of them, shows Prime data. 
 

But the proportions of resolutions opposed are not small for all the fund houses.
 
Franklin Templeton mutual fund voted against 7.84 per cent of the resolutions. Canara Robeco and BOI Axa voted against 6.72 per cent and 5.66 per cent of the resolutions, respectively. These are higher than the 2.32 per cent seen for the rest of the industry. Canara Robeco didn’t respond to a request for comment.
 
“We have just voted according to our understanding of the subject and keeping in mind the interest of minority shareholder,” said Alok Singh Chief Investment Officer, BOI Axa Investment Managers, in an emailed response.
 
Anand Radhakrishnan, Chief Investment Officer (Equity), Franklin Templeton Investments – India said in an emailed response that the firm has created a defined voting policy.
 
It takes into account factors such as board independence, management of  incentive structures, correct representation of facts, capital allocation and adherence to environmental, social as well as governance principles. 
 
“While we might not go ourselves to various meetings, we appoint proxies and have a separate department that does research on agenda items,” he said.