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Shareholders of Tata Motors rejected a proposal on the pay plan of the company's managing director and executive directors. Institutional shareholders opposed the compensation, citing the company's poor financial results. In addition to postal ballot, the company also offered an e-voting facility, it said in the notice sent to exchanges. This may not have happened a few years ago. While shareholders are becoming more aware of their rights, steps like e-voting have made it easier for them to participate in the decision-making process of companies in which they own shares.
The new Companies Act, which came into effect from April, has made e-voting mandatory for listed firms and those with at least 1,000 shareholders. Companies have to offer a platform so that shareholders can log on, see the resolution proposed and vote. This was widely expected to enhance the participation of minority shareholders, especially institutions. Instances like the Tata Motors one could become more common now.
There was some confusion over when companies should make the facility available, as the corporate affairs ministry had said e-voting would not be mandatory till December 31 this year. However, the Securities Exchange Board of India (Sebi) had later clarified that companies could not wait till December for providing the facility.
Companies can choose to conduct the voting process either online, that is, e-voting, or through physical voting. So far, among big companies, Reliance Industries (which held its annual general meeting or AGM on April 18) and HDFC Bank (which held its AGM on June 25) have chosen e-voting. While Reliance Industries had tied up with Karvy Computershare, HDFC Bank had tied up with Datamatics Financial Services.
Both depositories NSDL and CDSL offer the e-voting platform and customers can directly visit their sites and vote.
Vishal Gulechha, executive vice-president and head of equities at ICICIdirect.com, says, "Retail shareholders in India hardly participate or express their views at shareholders meeting.Though it is the most important right of a shareholder, most investors refrain from voting largely due to the inconvenience of either being present, or posting the ballot. E-voting has been introduced in order to secure wider participation of shareholders in the important decisions of the company. This will bring about transparency and greater corporate governance."
Many a time, the board of directors takes decisions that are not in the interests of the company and only benefit the promoters. These could include decisions like delisting of the company. For example, Essar Oil has got approval from the board of directors to delist the company and now it will be put to vote at the company's AGM, which is held in Gujarat, where it has its registered office. Even if small investors wanted to oppose the proposal, until now access was an issue.
Rakesh Goyal, senior vice-president, Bonanza Portfolio, says, "Retail shareholders may not have the time or resources to travel to other cities to participate in AGMs. That is why at most AGMs, we find only a handful of shareholders are called. These investors are hand-picked by the promoters. In some cases, they are even rewarded. Now e-voting will democratise the entire process."
Cases of proxy voting will also reduce, since shareholders need not be physically present at the AGM to cast their votes. Institutional investors are also likely to participate more actively.
But while exercising their right to vote, shareholders must look beyond short-term objectives, Goyal warns. For instance, retail shareholders may oppose expansion or capital expenditure plans because they feel it is not worth waiting for five to 10 years to see the results. Such decisions could work against the company and hamper growth plans.
"It is important to understand the significance of the matter which has been put for voting. Shareholders' objective must be to support management in decisions which would add value in company's performance and also make their voice heard in decisions which are not in the best interest of the company and shareholders," Gulechha points out.
PROCEDURE FOR VOTING BY SHAREHOLDERS
Online voting
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A few days before the AGM, the company announces the days and the timing when the online voting process will be available
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You will receive e-mails from the company with details such as user ID and password
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During the voting period, you have to go to the e-voting website, www.evotingindia.com, and log in with the user ID and password
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Then the system will prompt you to select the e-voting event number for the company
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You can view the detailed resolutions on the website and cast your vote available for voting.
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Members holding multiple folios/demat accounts shall choose the voting process separately for each of the folios/demat accounts
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Voting has to be done for each item of the notice separately. In case you do not desire to cast your vote on any specific item it will be treated as abstained
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The results on resolutions shall be declared at or after the AGM of the company and the resolutions will be deemed to be passed on the AGM date subject to receipt of the requisite number of votes in favour of the resolutions
- Once the resolutions are passed, the reports will be available on the company's website and on the stock exchanges
Physical voting
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A company can also choose to pass a resolution in the form of physical voting through postal ballot
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Companies first send a notice to all the shareholders, requesting them to send their assent or dissent in writing on a postal ballot
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Then ballot forms are sent to shareholders
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Shareholders can choose the option and provide their assent or dissent on the resolution
- They then send the physical postal ballot form back to the registrar
