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GlaxoSmithKline Consumer Healthcare has become the first Indian company to have adopted the cumulative voting exercise to appoint all its directors.
The system is understood to provide a fillip to the good governance practice among Indian corporate firms.
GlaxoSmithkline Consumer Healthcare Ltd has called for an Annual General Meeting on April 9 for the purpose.
The New Delhi-based proxy advisory firm IIAS, in its latest report on GSK Consumer Healthcare, said: “Cumulative voting can be a powerful tool for minority shareholders if they work together and cast all of their votes for a single candidate.” They can ‘hope’ to get their candidate elected, even if they only make up a small share of the population.
It further said timely and adequate disclosures on the nominated directors are needed besides a greater willingness on the part of institutional investors to work collaboratively on their voting strategy.
The cumulative voting route refers to a system wherein a shareholder can accumulate his votes for his preferred candidate on the nomination list.
This is in contrast to the regular or statutory type of voting in which shareholders may not give more than one vote per share to any single nominee.
For example, if the election is for seven directors and one holds 300 shares (with one vote per share), under the regular method, the shareholder could vote a maximum of 300 shares for any one candidate (giving him 2,100 votes total - 300 votes per each of the seven candidates). With cumulative voting, one could choose to vote all 2,100 votes for one candidate, 1,050 each to two candidates, or otherwise divide votes whichever he/she wanted.
According to J.N. Gupta, founder of Mumbai-based advisory firm SES, in the Indian context, where the holding of non-controlling shareholders are very small, there is a possibility that if all non-controlling shareholders join hands, then they can appoint a director of their choice.
“SEBI, in its paper on corporate governance, has put forward a proposal on cumulative voting.
“We shall wait and see what is finally decided. In the present system, this measure is not very effective as such an appointee may not have a voice in the board room,” he added.
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