Proxy advisory voting recommendations in India – an exploratory study

This paper aims to explore the voting recommendations made by proxy advisory firms in India by descriptively analyzing the “Vote Against” recommendations made by two proxy advisory firms for shareholder resolutions for the listed Indian firms. It also empirically tests the relationship between proportion of “Vote Against” recommendations and the parameters which are proved to be influencing corporate governance practices of a firm.

Empirical analysis of proxy voting recommendations for a sample of 77 listed non-financial Indian firms across four financial years.

The paper finds that two categories of shareholders proposals, “reappointment of non-executive directors” and “remuneration of statutory auditors”, account for 83.5 per cent of “Vote Against” recommendations. Further, there are significant differences in the proportion of “Vote Against” recommendations based on the type of “controlling ownership” of the firms. The regression analysis indicates that the relationships between proportion of “Vote Against” recommendations and determinants of corporate governance practices are mostly in line with the a priori expectations, as far as ownership is concerned but requires further analysis for other parameters.

Exploratory nature of this paper opens up new research issues in the upcoming Indian Proxy advisory industry. It suggests that the future research should consider the controlling ownership as an important parameter while analyzing the proxy firm recommendations.

Indian proxy advisory industry requires lots of nurturing from the regulators, and this exploratory study provides the basic insights in this regard. It also highlights potential corporate governance issues where the regulators need to tighten the corporate governance norms, like reappointment of independent directors and appointment of statutory auditors.

Pioneering Study in understanding the proxy advisory voting recommendations in an emerging market.