Paper on Shareholder Activism

Two years
ago, any talk of shareholder activism in India would be brushed aside or even
ridiculed. But, since then, things seem to have changed rapidly. The last
couple of years have witnessed shareholders in Indian companies becoming more
active and assertive. This space has also seen the proliferation of proxy
advisory firms and other corporate governance intermediaries that have aided such
All of
these generated some curiosity in my mind, and I attempted to look into these
developments with two objectives:
(i) to track the developments and trends that are emanating in India
with respect to shareholder activism; and
(ii) to set out some basic observations on whether at all these
activist measures are likely to have an impact on corporate governance in
The findings
thus far are contained in a working paper titled “The Advent of Shareholder Activism in
” that I have posted on SSRN. The abstract is as follows:
The recent spate of crises afflicting the corporate and financial
sectors around the world has triggered a new wave of corporate governance
reforms, which call for greater empowerment of institutional and retail
shareholders. The need for such reforms cannot be greater than in India where
controlling shareholders, or promoters, dominate the corporate landscape.

Consistent with
reforms in several countries that seek to confer greater power in the hands of
shareholders, the recent regulatory developments in India signify a greater
opportunity for shareholder participation in the form of postal ballot,
e-voting and the like. The rapid proliferation of proxy advisory firms, a
hitherto non-existent phenomenon in India, bestows shareholders with the advice
necessary to exercise their corporate franchise in an informed manner. The
presence of activist institutional shareholders such as private equity funds
and hedge funds has already caused an upheaval in some corporate boardrooms in

While these
developments pave the way for a transformation in the tenor of the governance
debate, shareholder activism encounters certain structural and institutional
weaknesses embedded in the Indian markets. The dominance of controlling
shareholders in most Indian companies operates to dampen the effects of
shareholder activism. The legal system and institutions in India are not
conducive to rendering timely and cost-effective remedies to shareholders who
adopt a litigation strategy to counter managements that are perceived to act
inimical to shareholder interests. This paper finds that although shareholder
activism is becoming palpable in the Indian markets, its impact as a measure of
corporate governance enhancement is far from clear.

Readers’ comments and critiques are welcome.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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