As we have previously discussed, the participation of retail (or even institutional) shareholders in Indian companies’ decision-making is still far from desirable. The Government has, however, been taking steps to enhance participation. About a decade ago, the concept of postal ballot was introduced. However, that has not made significant inroads, due to which the next round of reforms have been initiated. This is through the method of e-voting, which was introduced initially as an option for companies to offer their shareholders. SEBI has now made e-voting mandatory for top listed companies.
Last week, SEBI issued an amendment to the listing agreement making it mandatory for the top 500 companies listed at BSE and NSE to provide e-voting facility. This is in addition to the postal ballot option that continues to be available. This mandatory e-voting for top listed companies comes into effect on October 1, 2012, and applies to meetings for which notices are sent out after such a date. Companies are allowed to use recognised e-voting platforms, and the two depositories in India have already established their platforms – e.g. NSDL e-voting system and CDSL e-voting system.This is likely to bring about significant change in the manner in which major corporate decisions are taken. Shareholders may no longer be taken for granted, as their likelihood of participation is greater. However, this will function effectively only if the information requirements are enhanced as well. For example, greater details will have to be provided in the notice of the meeting/e-voting in a manner that can be appreciated by shareholders who are then able to decide in an informed manner. This deficiency is being addressed by another phenomenon that was hitherto non-existent in India, and that is proxy advisory firms. The rapid emergence of 3 proxy advisory firms that are currently operational in India perform the role of educating shareholders regarding specific resolutions that are put to vote, so that the shareholders may vote in an informed manner. In addition, shareholders (particularly of the institutional variety) are themselves becoming more active in the oversight of their portfolio of investments and are no longer passive spectators who only vote with their feet when confronted with strenuous relationships with managements or promoters. The TCI-Coal India episode is emblematic of this trend, which will likely compel managements to be more vigilant and receptive to shareholder interests and sentiments.