Historically, the passivity of
institutional investors in India has led to less than significant monitoring of
managements and controlling shareholders of companies. However, as I had noted
in an earlier paper, the Indian
markets began witnessing greater levels of shareholder activism in more recent
years. Among the regulatory efforts that have engendered activism, one relates
to a 2010 circular issued by the Securities and Exchange Board of India (SEBI)
to mutual funds requiring them to disclose their voting policies and their
manner of exercising of voting rights in individual investee companies.
institutional investors in India has led to less than significant monitoring of
managements and controlling shareholders of companies. However, as I had noted
in an earlier paper, the Indian
markets began witnessing greater levels of shareholder activism in more recent
years. Among the regulatory efforts that have engendered activism, one relates
to a 2010 circular issued by the Securities and Exchange Board of India (SEBI)
to mutual funds requiring them to disclose their voting policies and their
manner of exercising of voting rights in individual investee companies.
Last month, another regulator,
the Insurance Regulatory and Development Authority of India (IRDAI) issued
a circular to all insurance companies to comply with a stewardship code to
be implemented by the IRDAI. The circular provides “that insurance companies
should play an active role in the general meetings of investee companies and
engage with the managements at a greater level to improve their governance.
This will result in informed decisions by the parties and ultimately improve the
return on investments of insurers.” Beginning the financial year
2017-18, insurance companies are required to come out with a policy regarding their
position at general meetings of investee companies, and disclose the same
publicly. The stewardship code will be implemented on a “comply-or-explain”
basis.
the Insurance Regulatory and Development Authority of India (IRDAI) issued
a circular to all insurance companies to comply with a stewardship code to
be implemented by the IRDAI. The circular provides “that insurance companies
should play an active role in the general meetings of investee companies and
engage with the managements at a greater level to improve their governance.
This will result in informed decisions by the parties and ultimately improve the
return on investments of insurers.” Beginning the financial year
2017-18, insurance companies are required to come out with a policy regarding their
position at general meetings of investee companies, and disclose the same
publicly. The stewardship code will be implemented on a “comply-or-explain”
basis.
The Institutional Investor
Advisory Services (IIAS) has a detailed
analysis on the IRDAI’s circular and the impact it is likely to have on the
Indian capital markets. Given that insurance companies are large institutional
investors in Indian companies, this move would push the Indian markets further towards
increased shareholder activism.
Advisory Services (IIAS) has a detailed
analysis on the IRDAI’s circular and the impact it is likely to have on the
Indian capital markets. Given that insurance companies are large institutional
investors in Indian companies, this move would push the Indian markets further towards
increased shareholder activism.
