MFs remain indifferent in half of companies' resolutions in FY12
Despite having passed two years since capital markets regulator mandated fund houses to publish their general policies and procedures for exercising the voting rights in respect of shares held by them in companies and votes decision, asset management companies continue to be indifferent while voting at investee company shareholder meetings.
According to a report by InGovern Research Services Pvt Ltd, a proxy advisory firm, in almost half of the resolutions of companies fund houses have abstained from voting during the financial year 2011-12. Moreover, some of the mutual funds have disclosed their voting information incorrectly.
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During the year, there were 4,716 meetings in which 23,482 resolutions were passed. Out of them, fund houses voted 'For' in 11,894 resolutions but managed to muster courage to vote 'Against' only in 321 resolutions or one per cent of the total number of resolutions. On top of it, for rest of the resolution (48%) fund houses preferred to abstain from voting.
Meeting covered in the report include Annual General Meetings (AGMs), postal ballot (PBs), court convened meetings (CCMs) and extraordinary general meetings (EGMs) of the investee companies between April 2011 and March, 2012. The report raised questions whether Indian mutual funds are active share holders and are they taking vote reporting seriously?
Among the top five fund houses, UTI Mutual Fund and ICICI Prudential MF did the worst in terms of voting. UTI MF abstained from voting in 2,476 resolutions out of 2,641 resolutions while ICICI eschew voting in 526 resolutions out of 528 resolutions during the year. Reliance MF emerged as the top voter as the fund house abstained only in 32 resolutions out of its 2,080 resolutions.
According to Shriram Subramanian, founder and MD of InGovern Research Services said “Mutual fund houses need to take their fiduciary responsibility more seriously and need to adopt better voting policies and practices. The regulator and the mutual fund industry owe it to Indian capital markets to ensure better corporate governance."
Only four fund houses, namely JP Morgan, Sahara, IDFC and Goldman Sachs followed Sebi's circular in letter and spirit and did not refrain from any resolution.
Out of 44 mutual fund houses, 5 of them have still not disclosed their voting record information, adds report. According to it, of the remaining 39 fund houses, some of them have either reported data inconsistently or misrepresented voting disclosures.