Small investors give India Inc’s polls a miss

You own quite a few stocks, but have you ever voted at a company’s annual general meeting (AGM)? How about a postal ballot? If you haven’t, you aren’t alone.

A majority of small shareholders in Indian companies don’t exercise their right to vote, even when it comes to controversial corporate decisions.

Companies conducting postal ballots to obtain shareholder approvals file the results of these polls with the stock exchanges.

An analysis of data for 15 major contentious corporate decisions over the last two years reveals that the majority of small shareholders completely refrained from voting in every one of these events.

In six of them, less than 10 per cent of small public shareholders (not counting institutions) participated.

Shareholders haven’t really stepped forward to vote even in the cases of corporate actions that were said to be against their interests.

In November last year, Ambuja Cements conducted a postal ballot to seek approval for a mega-deal in which it was using up a large part of its cash reserves to buy shares in group entity Holcim India from its parent.

Despite vociferous opposition from proxy advisory firms to the deal, the resolution saw just 10 per cent of small shareholders participate. The deal sailed through.

The same experience was repeated when Wipro decided to hive off and de-list its thriving consumer business in 2012. Here again, just 10 per cent of public shareholders voted via the postal ballot.

Recently, Suzlon Energy sought the opinion of shareholders on reappointment of Tulsi Tanti as the company’s Managing Director. Many proxy advisory firms voiced concerns but only 5.9 per cent of public shareholders took part in the poll.

There are practical difficulties in participating in AGMs and EGMs, says Shriram Subramanian, Founder and Managing Director of Ingovern, a proxy advisory firm.

Where a company seeks shareholder opinion through a physical meeting, shareholders may not be willing to incur the time or the costs involved in attending the meetings, he says.

“Sesa Sterlite is a Nifty company and it holds its AGM in Tuticorin (South Tamil Nadu). How many investors will be able to make it to the AGM?” he asks.

Even if they do, proposals at such meetings can be passed by a show of hands.

A scientific ballot may be conducted only when a member specifically requests it.

But participation by minority investors does inch up when a deal gets a lot of press.

In 2012, when United Spirits made preferential allotment of shares to Diageo Plc to raise money to repay its debt, almost a third of the public shareholders cast their votes through postal ballot and e-votes.

This time, the resolution was passed with 99 per cent of them voting for the move.

Why expect small shareholders to turn up for meetings and exercise their voting rights when domestic institutions, also part of the public, drag their feet, ask proxy firms.

A report from Ingovern shows that in 2012-13, mutual funds abstained from voting in 51.5 per cent of the resolutions proposed by their investee firms.

All this may interest the Ministry of Corporate Affairs, which is now counting on a company’s non-promoter shareholders to discourage firms from bad governance practices such as related-party deals and opaque M&As.

The new Companies Act lists several corporate actions where interested parties are barred from voting on the resolution. Now, all that remains to be done is to get investors to actually cast their votes.