Minority shareholder activism sees green shoots

MFs turn bit more active in proxy voting in 2012-13

The Securities and Exchange Board of India’s repeated reminders to mutual funds, asking them to be more active in the decision-making process of investing companies, haven't fallen on deaf ears after all. In 2012-13, top fund houses improved their record in voting on important resolutions by companies. But analysts said mutual funds' proxy voting policies were far from impressive, adding these investors hadn't been vocal in opposing controversial steps.

Proxy voting is a system through which institutional investors such as mutual funds vote on behalf of the unit holder.

A study of the voting patterns of leading mutual funds shows in 2012-13, the majority of these cast their votes on more resolutions compared to the previous year. For instance, HDFC Mutual Fund, the country largest asset manager, voted in 393 resolutions, about 80 per cent of the approximate 470 resolutions. It voted in favour of 390 proposals and vetoed three. In 2011-12, it had voted in about 40 per cent of the proposals.

Reliance Mutual Fund maintained its record in proxy voting. Of the 2,400-odd proposals, it gave thumbs up to about 2,320 and vetoed 16. Among leading fund houses, ICICI Prudential and UTI Mutual voted the least — while ICICI Prudential voted in about 150 of the 1,500-odd resolutions (10 per cent), UTI Mutual participated in about 125 of the 2,300-odd proposals. Birla Mutual Fund is yet to come out with its proxy voting details.

DSP Blackrock Mutual improved its voting record from the previous year, abstaining from 11 of the 1,700-odd resolutions. In 2011-12, the fund house had skipped about 1,100 of the 1,500 resolutions.

Most mutual funds, including Reliance Mutual Fund, DSP Blackrock, HDFC and UTI, voted against separate resolutions by ACC and Ambuja Cements to raise royalty payment to Swiss parent Holcim to one per cent of their annual net sales. Fund managers are likely to vote against the latest multi-layered transaction involving Holcim, Ambuja Cements and ACC, if they heed suggestions by proxy advisory firms and analysts, who feel the deal is against the interests of minority shareholders.

In other instances, Reliance Mutual vetoed various proposals by Jaiprakash Associates, Gulf Oil, Gammon and Shriram EPC, among others. HDFC Mutual opposed resolutions by Jindal Steel & Power, Elecon, Vascon Engineering, etc.

Officials at proxy advisory firms said mutual funds had to be more "transparent" in their voting policies. "Mutual funds still have a long way to go to act as responsible investors and exercise their voting rights. They have a fiduciary duty to their unit holders to vote. Mutual fund houses have to come out with detailed voting guidelines and stick to those," said Shriram Subramanian, managing director, InGovern Research Services, a proxy advisory firm.

Mutual fund industry officials said most fund houses were constrained by "business interests" as they derived a large chunk of assets from companies. "For debt schemes, mutual funds need corporate money. There is certainly a fear in the industry that if they vote, it will not go down well with corporates," said the chief executive of a mutual fund.

* HDFC MF voted 80% of resolutions

* Reliance MF voted for over 95% of resolutions

* ICICI Pru MF voted for 10% of resolutions

* UTI MF voted for 5% of resolutions

* DSP Blackrock voted for over 95% of resolutions