MFs opposed only 1.5% resolutions in 2012-13

The number of instances where a mutual fund has voted against a proposal is very low

August 13, 2013 2:07 IST | India Infoline News Service
Indian mutual funds are still largely passive and/or indifferent while voting at investee company shareholder meetings. Only 1.5% of total resolutions put forth by investee companies have been voted against by mutual funds, according to a report titled “Mutual Funds Voting Pattern 2013 Analysis”.

The report—by InGovern—said that an analysis of the voting patterns of the mutual fund houses indicates that most Indian mutual funds have either voted in favor of proposals or have decided to largely abstain from voting in resolutions put forth by their investee companies.

The number of instances where a mutual fund has voted against a proposal is very low. No significant improvements are seen in voting participation by AMCs in shareholder meetings compared to previous two years.

The report covers annual general meetings (AGMs), postal ballots (PBs), court convened meetings (CCMs) and extraordinary general meetings (EGMs) of the investee companies between April 2012 and March 2013.

Mutual funds have disclosed a total of 5,460 meetings consisting of 3,724 AGMs, 858 PBs, 323 CCMs and 555 EGMs for the year 2012-13. Out of the total 28,290 resolutions disclosed, mutual funds have voted against just 1.5% of the resolutions, whereas they have voted FOR in 47.0% of the resolutions and abstained from voting in 51.5% of the resolutions.

Two out of 43 mutual funds completely abstained from any voting for FY2012–13 and hence have not made any voting disclosures. Of the remaining 41 fund houses, some of them have either reported data inconsistently or misrepresented voting disclosures even in the third year of reporting.

Some of the mutual funds have disclosed their voting information incorrectly even in the 3rd year of reporting, the report added.

In the year 2012-2013, listed companies in India also witnessed some level of opposition on some of the major resolutions which came under larger public scrutiny post negative recommendations from InGovern.

Some of these resolutions were opposed by all mutual funds while in other cases mutual funds largely abstained from voting with only a few of the mutual funds voting against these resolutions. However, records suggest that there is increased participation from mutual funds on resolutions which are opposed by proxy advisory firms.

Mutual funds voted for in 47% of the resolutions and abstained from voting in 51.5% of the resolutions
There is a need for mutual funds to adopt a more detailed set of voting policy guidelines to ensure better corporate governance practices at investee companies.

InGovern has analyzed the proxy voting patterns of Indian mutual funds as per disclosures made by the respective AMCs for the year 2012-13.

The objectives of the report are: To assess the pattern of voting by mutual funds in ensuring better corporate governance practices at investee companies, to assess the quality of reporting of voting done by mutual funds and to allow mutual funds to benchmark themselves against best practices amongst their peers.

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