Case-Study Evidence of Shareholder Activism

We
have previously highlighted the rise of shareholder activism in India (here
and here).
Activism has been aided by regulatory reforms that have enlarged shareholder
participation. In addition, market changes have resulted in previously passive
institutional investors becoming more active in recent times. They have further
been supported by the emergence of a growing and vibrant proxy advisory
community in India.
At
the same time, there is some cynicism surrounding shareholder activism in the
Indian context due to the concentration of shareholdings in most listed
companies. To what extent can outside shareholders (even institutions) play a
role in influencing the governance of such companies? Is activism likely to
have any impact at all? These questions can possibly be answered through
empirical evidence. While we are not aware of any detailed empirical studies
that measure the impact of shareholder activism in India, an emerging body of
case-study evidence points towards some influence that institutional
shareholders have brought to bear on Indian companies in the new environment.
In
this regard, a
recent report
issued by IiAS, one of the proxy advisory firms in India,
carries out a case-study analysis that indicates that outside shareholders have
become more active in India, and have also been successful in defeating
proposals of management and promoters where they have been found to be adverse
to minority shareholder interest. The report contains a number of
illustrations. Moreover, it lists out the various strategies available to
shareholders to assert their rights and remedies under Indian law.

These
findings indicate that despite concentration of shareholdings, there is room
for shareholder activism in Indian companies, and that the influence of
institutional shareholders is set to grow.

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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