Norms don’t affect independence, say proxy advisories

Their influence on investors irks some

A day after Uday Kotak raised concerns over global advisory firms influencing HDFC shareholders to vote against the reappointment of Deepak Parekh, top officials of Indian advisory firms said regulation did not mean ensuring an opinion or recommendation that suited the company.

While Mr. Kotak called for some kind of regulation on such global entities, domestic firms are of the view that though proxy advisory firms can be regulated or registered — as is the case in India — that did not mean their recommendations can be controlled.

“Regulation of proxy advisory firms does not mean that one can regulate the way they make recommendations,” said Shriram Subramanian, founder and MD, InGovern Research.

‘Investor makes choice’

“Indian firms are registered with SEBI and have voting policies, but advisory firms make recommendations; it is eventually the investor who votes. In a corporate democracy, investors are allowed to vote as per their mind. And, corporate democracy is beyond personalities,” added Mr. Subramanian.

On Monday, while speaking on the occasion of the listing of HDFC Asset Management Company, Mr. Kotak highlighted the fact that close to 23% shareholders voted against the reappointment of Mr. Parekh at the company’s annual general meeting.

“Even if global proxy advisory firms were regulated, the outcome of the HDFC AGM would have been the same. HDFC has near 75% foreign shareholding and one should not cry foul if they vote in a certain manner on any specific set of resolutions. One cannot have the cake and eat it too, one cannot seek investments, and not be accepting of the way the investor votes,” said Mr. Subramanian.

InGovern had recommended voting against the resolutions seeking reappointment of Bimal Jalan and Bansi Mehta as independent directors. Interestingly, both Mr. Jalan and Mr. Mehta withdrew their nominations for reappointment before the AGM.

Stakeholders Empowerment Services (SES) had also recommended voting against the resolutions seeking reappointment of J.J. Irani along with Mr. Jalan and Mr. Mehta.

“Regulation does not mean taking away the independence of the proxy advisory firm,” said J.N. Gupta, MD, SES. “However, global proxy advisory firms that track Indian companies should be registered in India just like domestic advisory firms are.”

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