Institutional shareholders’ activism surged 44% in FY23: Prime Database

However 97 percent of them still passed, mostly owing to high promoter holding in the companies, according to Prime Database

In a sign that signifies a vibrant market environment, institutional shareholders have become much more active compared to earlier and making their voices heard during shareholder meetings, data shows.

According to data dug out by Prime Database, the number of resolutions where more than 20 percent of institutional shareholders expressed their dissent increased by a huge 44 percent to 1,833 in FY23 among those listed on the NSE main board. This was up from 1,256 in FY22 and 636 in FY21. Among the Nifty 50 companies, this increased by 35 percent to 73 in number (as compared to 54 last year).

Like in previous years, most of such resolutions related to board changes and remuneration, specifically employee stock ownership plans (ESOPs).

"This reflects an increase in advocacy on the part of institutional investors, which is on account of the facility of e-voting being made mandatory a few years back as also the stewardship codes brought about by regulators. It is also attributable to a greater role being played by proxy firms as also a steady increase in institutional holding as a whole,” said Pranav Haldea, Managing Director, PRIME Database Group.

However, of the above mentioned 1,833 resolutions though, a huge 1,774 or 97 percent of them still passed, mostly owing to high promoter holding in the companies.

There were 102 resolutions which were completely voted against by shareholders in FY23, an increase of 42 percent from 72 resolutions in the previous year and 48 resolutions in FY21. Of these, 21 were re-proposed to be passed, out of which 18 resolutions eventually passed while 3 of them failed again, date showed.

Domestic mutual funds, as a whole, voted in favour in 93 percent of resolutions put up for vote and against in 7 percent of the cases. SEBI making it mandatory for mutual funds to vote on all resolutions with effect from April 1, 2022 has resulted in the abstinence number becoming nil.

Among other details, Prime Database shared that as many as 1,005 resolutions pertaining to related party transactions (RPTs) were proposed in 2022-23, more than double of the 474 such resolutions in 2021-22. While 102 or 10.15 percent of these resolutions were voted against by more than 20 percent of institutional investors, just 16 or 1.59 percent of such resolutions were defeated.