PROXY ADVISORY FIRMS AND CORPORATE GOVERNANCE IN INDIA & UNITED STATES: REGULATORY FRAMEWORK AND EMERGING ISSUES

Author

Vedant Thakur,Atul Raj


Abstract

 Proxy Advisory Firms are the newest entrants in India’s corporate governance landscape, bringing with them the tools for enhancing the participation of institutional investors while establishing greater corporate accountability through their recommendations on corporate proposal and governance consultancy. In this light, the present paper recognizes the various trends responsible for the advent of the proxy advisory industry such as increased institutional ownership of public stocks, diversified portfolios and shareholder activism. While analyzing the mushrooming of various proxy advisory firms, the paper then undertakes to identify and study the key market players such as “Institutional Shareholder Services” and “Glass, Lewis & Co.” in more developed and matured jurisdiction such as the United States and “InGovern Research Services”, “Institutional Investor Advisory Services India Limited” and “Stakeholders Empowerment Services” in the context of developing jurisdiction such as India.

The paper then undertakes to analyze the existing regulatory framework of proxy advisors in India, United States and also embarks upon the oversight of International Regulatory Organizations concerning the proxy advisory industry. The paper furthers by elucidating the emerging issues with proxy advisory firms such as bearing heavy influence on institutional investors, non-transparency and inaccuracy involved in its research methodologies and conflicts of interest through self-dealing and bias. While addressing these criticisms of corporate lobbyists, the paper puts forth both practical implications for the proxy advisory industry worldwide and the policy implications in relation to India and United States. The paper concludes by identifying the importance of independence and equitability in the present proxy advisory industry for paving the way towards greater corporate governance and accountability in future.



Keywords

Corporate Lobbyists, International Regulatory Organizations, Proxy Advisory Firms, Regulatory Framework, Shareholder Activism.



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References


Statutes and Regulations

  1. Companies Act, No. 18 of 2013 (India).
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  12. SEC Adopts 2019 Proxy Voting Amendments, Minus the Bite, Vinson & Elkins (Aug. 4, 2020), https://www.velaw.com/insights/sec-adopts-2019-proxy-voting-amendments-minus-the-bite/.
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Websites

  1. Glass, Lewis & Co., Board Accountability Index, http://www.glasslewis.com/solutions/bai.php.
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  5. Institutional Investor Advisory Services India (IiAS), http://www.iias.in/.
  6. Stakeholders’ Empowerment Services (SES), http://www.sesgovernance.com/.

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