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For most MFs, silence is golden even at investee company meetings

Suresh P. Iyengar Mumbai | Updated on August 12, 2013 Published on August 12, 2013

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Raise voice against just 1.5% of proposals by listed firms: Study

Mutual fund houses continue to remain passive spectators to board resolutions put forth by the companies in which they have substantial investments, according to a new study.

Of the 28,290 resolutions disclosed by 43 mutual funds last fiscal, mutual fund houses have voted against just 431 resolutions (1.5 per cent), according to an InGovern study.

These mutual funds have abstained from voting in 14,581 (51 per cent) cases, while voting in favour on 13,278 proposals (47 per cent), said the report prepared by the investor advisory group.

Shriram Subramanian, Managing Director, InGovern, said the proxy voting patterns of the mutual funds helped gauge their role in ensuring better corporate governance practices in companies where they invest.

Of the total 43 mutual funds operating in the country, two abstained from any voting, thus making no voting disclosure in the annual report for the last fiscal.

Reliance Mutual Fund has disclosed that it participated in 411 meetings and expressed its opinion on 2,395 proposals. It has favoured 2,315 proposals (97 per cent) and voted against 16 resolutions, while abstaining from 64.

Similarly, of the 2,402 proposals voted by UTI Mutual Fund, it abstained from 2,282 (95 per cent). The fund house approved 110 plans, while rejecting 10. Reflecting better participation, Franklin Templeton has voted against 143 plans (10 per cent), while voting in favour of 1,321 (89 per cent). It abstained from voting in 13 resolutions. BOI AXA Mutual Fund has abstained from voting in 555 cases (94 per cent) of the 592 proposals it participated in and voted against six.

Need more guidelines

Besides greater regulatory supervision for better institutional investor participation in shareholder meetings, Subramanian said, mutual funds need to adopt a more detailed set of voting policy guidelines to ensure better corporate governance practices in companies where they invest.

Mutual funds should align their voting practices and disclosures to international standards by making quarterly disclosure of voting data and fund-wise reporting of voting data, he added. It would also be helpful if the fund houses disclose the methodology they adopt on a particular issue.

Some fund houses have already adopted these best practices. For instance, BNP Paribas Mutual Fund and Morgan Stanley Mutual Fund disclose their voting pattern on quarterly and half-yearly basis, respectively. Franklin Templeton Mutual Fund provides fund-wise voting details.

Jagannadham Thunuguntla, Strategist and Head of Research, SMC Global Securities, said the active participation of mutual funds and financial institutions in corporate proposals will help small investors take informed decisions. “However, the vote of institutions and small investors will have little impact on the decision making as the promoter holding in most Indian companies are very high,” he added.

> suresh.iyengar@thehindu.co.in

Published on August 12, 2013
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