Proxy advisory firms oppose Anant’s appointment on RIL board: What are these firms, and how should investors react?

“At 28 years of age, his (Anant’s) appointment as a Non-Executive Non-Independent Director does not align with our voting guidelines,” IiAS said in a report while recommending shareholders to vote ‘against’ the proposal.

According to a Bloomberg report, ISS in an October 12 note said, “A vote against this resolution is warranted as Anant Ambani’s limited leadership/board experience of around six years, raises concerns on his potential contribution to the board.”

On September 25, RIL, in a postal ballot notice, sought approval from members of the company, by way of a remote e-voting process for the appointment of Isha, Akash and Anant as non-executive directors of the company.

The e-voting started on September 27 and will end on October 26. As per IiAS report the appointments of Isha, Akash and Anant are expected to be effective before December 31, 2023.

What are proxy advisory firms?

Proxy advisory firms position themselves as independent firms that provide advice to individual shareholders, minority shareholders or institutional investors relating to the exercise of their rights in a company, including recommendations on public offers or voting recommendations on agenda items.

How many proxy advisory firms are there in India?

Some of the major proxy advisory firms in the country include IiAS, Stakeholders Empowerment Services (SES) and InGovern. Proxy advisors are regulated by the markets regulator Securities and Exchange Board of India (Sebi).

Why are proxy advisory firms important?

Proxy advisory firms closely look at listed companies, their performance and resolutions, and advise shareholders about their rights. They work in the interest of shareholders who might not always be able to analyse the impact of any resolution adopted by a company. These firms suggest investors vote for or against any corporate decisions.

“Our idea is to educate investors in such a manner that they can protect their rights. This begins by giving them our opinion on the resolutions so that information is sufficient for them to make informed decisions,” said J N Gupta, Co-founder and Managing Director, Stakeholders Empowerment Services (SES).

Proxy advisory firms also work with companies to improve their corporate governance practices.

What should investors do?

Proxy advisory firms’ role is to educate investors. The recommendations given by proxy advisors are non-binding for investors. Investors should always do their own research to arrive at a voting decision.

“Our suggestion should not be taken as gospel truth. One should analyse various aspects before voting,” Gupta said. At the same time, it is very important for a proxy advisory firm to present investors opinions that are unbiased, conflict-free and focused, he said.