Indian investors are still a few years away from seeing managements of large companies genuinely putting minority shareholders’ interest before their own, but here’s a start.
As Mint reported on Thursday, most asset management companies (AMCs) have uploaded information on how they voted in shareholder meetings during 2010-11 on their websites. In March 2010, the Securities and Exchange Board of India mandated fund houses to send representatives to shareholder meetings of companies in which their different funds have invested, and then disclose how they voted (approve, disapprove or abstain) to their unitholders once a year.
It all started in December 2008, when during a telephonic conference call organized by the then management of Satyam Computer Services, including its founder B. Ramalinga Raju, for analysts and fund managers, the audience lost its cool and blasted the management for proposing to acquire unrelated companies owned by Raju’s children.
A cursory glance at the decisions that the top 10 AMCs took at various corporate shareholder meetings suggests that the quality of their participation can improve. Fund houses should not look at voting on corporate decisions as a regulatory chore; they need to be more alert to cases of malfeasance and sweet deals.
Reliance Capital AMC’s disclosure is perhaps the most comprehensive, running across 68 pages, which reflects its increased participation; but the fund house did not oppose a single proposal, keeping the merits and demerits of each of those proposals aside. Only a handful of AMCs in the top 10 have disagreed with company management proposals and the number of such decisions is negligible. ICICI Prudential AMC “abstained” from most of the proposals of meetings it attended.
Though it’s a good start, fund houses will have to work around the reality that a fund house’s representative may not have a good idea about the company or its proposal, and hence it is forced to abstain. In which case, fund houses ought to take this up more seriously. Interference in day-to-day matters is not necessary, but as long as fund houses act responsibly in matters concerning the minority shareholders’ interest—such as delisting or buy-backs—where promoter groups seek to benefit at the cost of other shareholders, we are in safe hands.
And if insurance companies— armed with meatier holdings than mutual funds—are made to cast their vote, shareholder power will get a boost. Finally, a good act must begin at home; we as investors must also take our ballot votes and annual general meeting invitations more seriously and not consider them as so much junk mail.
What will it take to sensitize managements to shareholders? Tell us at firstname.lastname@example.org