Funds Learn to Say No as Boardrooms Challenged: Corporate India

by Santanu Chakraborty and Bhuma Shrivastava for Bloomberg

Money managers in India’s $1.7 trillion stock market are no longer giving rubber-stamp approval to the nation’s corporate boards.

Local mutual funds voted to reject 6.6 percent of the proposals presented to shareholders in the nine months ended December, up more than fourfold from the year to March 2013, India’s securities regulator said in an e-mailed response to questions from Bloomberg News. Their participation rate in shareholder votes jumped to 83 percent from 49 percent, spurred by new disclosure rules that require fund managers to provide a rationale for their decisions to investors.

The more assertive stance from minority shareholders prompted United Spirits Ltd. to modify plans to loan money to companies run by its former chairman and led Maruti Suzuki India Ltd. to put on hold a proposal to transfer a new factory to its parent. While India still lacks the type of activist investing personified by U.S. billionaire Carl Icahn, funds’ growing willingness to challenge management may help improve governance in a nation ranked 94th out of 144 countries for the efficacy of its corporate boards by the World Economic Forum. Read more here.

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