ESOPs to board changes: Advocacy by institutional shareholders surges 44%
New Delhi, June 29, 2023
Types: Most number of resolutions related to 'Board Changes' at 6,138. This was followed by resolutions relating to the auditors, remuneration and financial results.
When it came to ESOPs, renumeration and board changes, shareholder meetings in financial year 2022-23 saw a surge in advocacy by institutional shareholders who made their voices heard by voting against several resolutions proposed by managements.
The number of resolutions where more than 20 per cent of institutional shareholders expressed their dissent increased 44 per cent to 1,833 in 2022-23 in companies listed on NSE (main board) from 1,256 in 2021-22 (and 636 in 2020-21), according to primeinfobase.com, an initiative of PRIME Database Group
Resolutions where more than 20 per cent of Institutional Shareholders cast a negative vote, for companies belonging to Nifty 50 also increased 35 per cent to 73 in number (as compared to 54 last year).
"This reflects an increase in advocacy on the part of institutional investors, which is on account of the facility of e-voting being made mandatory a few years back as also the stewardship codes brought about by regulators. It is also attributable to a greater role being played by proxy firms as also a steady increase in institutional holding as a whole," said Pranav Haldea, Managing Director, PRIME Database Group.
Of the above mentioned 1833 resolutions, 1774 (or 97 per cent) still passed, mostly owing to high promoter holding in the companies.
Voting by promoters, institutional shareholders and other public shareholders was as follows:
As can be seen, almost all resolutions were voted in favour by Promoters.
Resolutions which did not pass: There were 102 resolutions which were completely voted against by shareholders at AGMs/EGMs/Postal Ballots and Court/NCLT Convened Meetings held in 2022-23, an increase of 42 per cent from 72 resolutions in the previous year (and 48 resolutions in 2020-21). Of these 102 resolutions, 21 were re-proposed to be passed, out of which 18 resolutions eventually passed while 3 of them failed again.
Related Party Transactions (RPTs): As many as 1,005 resolutions pertaining to RPTs were proposed in 2022-23, more than double of the 474 such resolutions in 2021-22. While 102 or 10.15 per cent of these resolutions were voted against by more than 20 per cent of institutional investors, just 16 or 1.59 per cent of such resolutions were defeated.
Break-up of Voting by Shareholder Type (Promoters, Public - Institutional & Public - Others): In 2022-23, 15,232 resolutions (excluding 22 resolutions which were withdrawn/not put to vote) were proposed to be passed in 3,254 AGMs, EGMs, Postal Ballots and Court/NCLT Convened Meetings of 1,832 companies which were listed on NSE (main board) as on 31st March 2023, up from 12,708 resolutions in 1736 companies in 2021-22, a rise of 20 per cent.
Ordinary vs Special Resolutions: The number of ordinary resolutions proposed were 9,970 (or 65 per cent of the total) while the number of special resolutions were 5,262 (35 per cent). While 62 special resolutions failed, 40 ordinary resolutions also failed.
Resolution Types: Most number of resolutions related to ‘Board Changes’ at 6,138. This was followed by resolutions relating to the auditors, remuneration and financial results.
Voting by Domestic Mutual Funds: 47 Domestic Mutual Funds, as a whole, voted in favour in 93 per cent of the cases and against in 7 per cent of the cases (abstained in 0 per cent cases in FY 2022-23).
Market regulator Sebi makin it mandatory for mutual funds to vote on all resolutions with effect from 1 April 2022 has resulted in the abstinence number becoming nil.
[The Business Standard]
