The success of institutional shareholders in blocking Zee EntertainmentZee Entertainment Enterprises promoter’s plan to raise their stake through fund infusion last week has created a buzz around shareholder activism. But the numbers tell a different story — just 24 out of 4,840 resolutions that were put to vote by Nifty 500 companies in 2024 were defeated.
If anything, shareholder activism remains mostly a work in progress in Corporate India. A study by proxy advisory firm Institutional Investor Advisory Services (IiAS) notes that while institutional investor participation stood at 79.29% during voting on board resolutions in 2024, marginally higher than promoter participation at 78.69%, institutional investor dissent stood at just 5.44%. In 2022 and 2023, institutional investor dissent was 6.73% and 4.92%, respectively, even as participation by these shareholders stood at 85.57% and 79.45%.
“In India, promoters in many companies have 51% ownership or above, which often tilts the scale in their favour during the voting process,” Amit Tandon, founder and MD, IiAS, said. “Low dissent also underscores cautious stewardship on the part of institutional shareholders, which is not the case in markets such as the US and the UK. Companies there are professionally run and institutionally owned, which mean they have a larger share of voice in the voting process,’ Tandon says.
In the case of Zee, both IiAS and InGovern advised shareholders to vote against the proposed capital infusion, citing corporate governance issues, ample cash on books and other fundraising avenues such as a rights issue available for the board to consider. Institutional shareholders took note of this. This resolution saw institutional dissent of 52.22%, the voting outcome showed. The special resolution failed to secure the requisite 75% majority.
Shriram Subramanian, founder and MD, InGovern, said that shareholder activism in India is gaining ground, albeit slowly. “Institutional shareholders today are informed. They are aware of how a company is being run and while voting outcomes will depend on the shareholding pattern within a company, participation from institutional shareholders is high, which is a good sign,” he said.
A decade ago, institutional shareholder participation stood at just around 10-15% in India Inc, implying the jump in participation now to 79.29% is big. But it has been falling in the last three years, data from IiAS showed. Also, a closer look at voting trends shows that barring 45 resolutions that were defeated in 2023, the number of defeated resolutions stood at 24 in 2024 and 2022. This is just 0.5% of an average of 4,700-4,800 resolutions that were put to vote over the last three years by Nifty 500 companies, according to the IiAS study.
Experts say that institutional shareholders may have to show greater interest in the management and corporate governance of the companies they are invested in. For instance, the proportion of mutual funds voting against board resolutions in India has more than doubled in a decade to 7% now from around 3% in 2015, according to mutual fund executives that FE spoke to.
A top industry executive said that mutual funds today are playing their role in highlighting their concerns through the voting process with regard to a variety of resolutions put forth by company boards. This can range from CEO or promoter compensation to changes in capital structure, employee stock option plans (ESOPs), related party transactions, appointments and reappointments to the board, etc.
The IiAS study notes that out of the 24 resolutions that were defeated in 2024, 11 pertained to director appointments, six were to do with ESOPs and three were in connection with related party transactions.