Are shareholders exercising their vote?

M Krishnamoorthy/VR Narasimhan | Updated on December 29, 2019

Simple and thorough Legal, regulatory framework is conducive enough for active participation by shareholders   -  ipopba

E-voting has made little impact on their general apathy. An analysis of Nifty-50 companies shows a decline in voting interest

Shareholders are the owners of the corporation. As owners, they have a right and responsibility to participate in the decision-making process and to vote on resolutions proposed by the management. Traditionally, a majority of small shareholders stayed out of the general body meetings owing to reasons such as cost and effort involved in attending the meetings or a feeling that their votes will not matter.

Having realised this tendency of retail shareholders to skip the annual general meetings (AGMs), the Companies Act, 2013, has made it compulsory for all listed companies to offer an e-voting facility. With the advent of new technology, e-voting service vendors have introduced ‘m-voting’ (mobile voting), making the voting process simple and easily accessible with reasonable security.

Now, the top 100 listed companies are required to provide a live webcast of AGM proceedings. All these facilities have empowered small shareholders to follow the proceedings of the AGM and vote from the comfort of their home.

The SEBI Listing Regulations (LODR) enlist the rights of shareholders. The LODR makes it an obligation for a listed entity to provide all that is necessary so that shareholders, irrespective of the number of shares held, are given an opportunity to participate in the corporate governance process. The AGM notices are elaborate enough to explain how to e-vote, etc. Today, the legal and regulatory framework is conducive enough for active participation/voting by retail shareholders.

A study was conducted by the National Institute of Securities Markets (NISM) to check how well the e-voting facility is being used by retail shareholders (non-promoter and non-institutional). The required data for Nifty-50 companies was taken from publicly available information ie, the websites of stock exchanges and depositories.

Shareholder behaviour

The paid up capital of the Nifty-50 companies has not changed significantly at a gross level over the 2016-17, 2017-18 and 2018-19 period. It moved from ₹55,749 crore to ₹62,610 crore. The changes are attributable to buyback, bonus issues or the exercise of ESOPs. Only in the case of one company, there was an expansion of capital. It was observed that the total number of shares (therefore votes) have increased in 2018-19 due to issue of bonus shares and exercise of options.

The number of retail shareholders also has increased to 2.17 crore in 2018-19 from 1.92 crore in 2016-17. However, a deeper study revealed that the total number of retail shareholders in nine out of the 50 companies have reduced by 7.52 lakh in 2017-18 and by 1.88 lakh is 2018-19. In other words, the number of shareholders in these nine companies have reduced by 9.4 lakh over two years.

Out of the Nifty-50, 23 companies registered an increase in the number of retail shareholders; it went up by 14.84 lakh and 18.88 lakh 2017-18 and 2018-19 respectively — or a total of 23.72 lakh shareholders. Eighteen out of the 50 companies showed a mixed trend of increase in number of shareholders in one year and decrease in another.

It cannot be ruled out that shareholders who are not in agreement with the management policies of the company would have sold their stake instead of exercising their votes in the general body. Further, the shareholders who are indifferent to the decisions of the management and only consider potential financial gains would have bought the shares.

Voting patterns

With regard to voting, the total number of retail shareholders who voted during 2016-17, 2017-18 and 2018-19 was 88,685, 1,13,507 and 1,21,537, respectively. When compared to the total number of retail shareholders indicated above, the participation seems to be not at all encouraging. In percentage terms, this remained less than 0.6 per cent of the total retail shareholders eligible for voting.

The actual number of shareholders voted has been grouped and data can be seen from the Table. It is seen that in most of the slabs, the number of companies have fallen over the three-year period.


A deeper analysis of companies in which more than 2,000 shareholders voted showed that the number of shareholders who voted has been continuously coming down over the last three years. Only in the case of 10 companies, there was continuous increase in the number of shareholders voted.

Consistent aversion

It may be observed that the shareholders, who expressed sensitivity to either financial or governance changes in the company through selling or acquiring shares, continued to show their apathy towards voting. It is pertinent to mention here that while the number of retail shareholders in 2017-18 increased by 3.75 lakh, the number of shareholders who voted improved only by 24,822.

Clearly, those who had bought shares recently were also not keen on voting. The situation in 2018-19 is no different; while the number of retail shareholders increased by 2.17 lakh when compared to 2017-18, the number of shareholders who voted went up just by 8,000. The trend in availing of regulatory right bestowed is not encouraging at all.

The data analysed only shows shareholder apathy/indifference in availing of the e-voting facility. It is seen that not even 1 per cent of total household shareholders have voted.

The scenario further exposes that recent technological initiatives like mobile voting have not made any impact on retail shareholders’ participation on voting.

There is a need to examine the factors for this shareholder apathy. It definitely calls for corporate initiative to improve e-voting; otherwise it could lead to a policy/regulatory intervention.

Krishnamoorthy is a Member of Faculty and Narasimhan is the Dean at the School for Corporate Governance, National Institute of Securities Markets. Views are personal

Published on December 29, 2019

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