WHY IN NEWS ?

  • Recently, the proposal to appoint Anant AmbanI on the board of Reliance Industries Ltd (RIL) is facing opposition from two proxy advisory firms.

WHAT ARE PROXY ADVISORY FIRMS?

  • According to Regulation 2(1)(p) of the SEBI (Research Analysts) Regulations. 2014, ‘proxy advisor’ refers to any individual or any organization that prepares recommendations and gives advice for the institutional investors or shareholders.
  • Proxy advisor firms aid them in the casting of their vote in respect of any policy issues or a public offer.
  • These are independent research outfits that weigh all the pros and cons of any decision and thus provide research and voting recommendations for their clients.
  • Proxy advisory firms position themselves as independent firms that provide advice to individual shareholders, minority shareholders or institutional investors relating to the exercise of their rights in a company, including recommendations on public offers or voting recommendations on agenda items.
  • Proxy advisors are regulated by the markets regulator Securities and Exchange Board of India (Sebi).

IMPORTANCE OF PROXY ADVISORY FIRMS:

  • Proxy advisory firms closely look at listed companies, their performance and resolutions, and advise shareholders about their rights.
  • Proxy advisory firms’ role is to educate investors.
  • The recommendations given by proxy advisors are non-binding for investors.
  • They work in the interest of shareholders who might not always be able to analyse the impact of any resolution adopted by a company.
  • These firms suggest investors vote for or against any corporate decisions.

PROXY ADVISORY FIRMS IN INDIA:

  • Some of the major proxy advisory firms in the country include IiAS, Stakeholders Empowerment Services (SES) and InGovern.
SYLLABUS: PRELIMS, CURRENT AFFAIRS