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Institutional EYE

Commentary on Corporate Governance Issues

Shareholders flex their muscle

Shareholders have become more discerning when it comes to voting on resolutions. Since January 2014, 66 resolutions (for companies in the IiAS coverage list) have been defeated by shareholders. This is attributable to multiple factors

  • the enhanced powers of shareholders under the new governance codes: Majority of minority voting

  • increasing institutional ownership: the push from regulators towards a stewardship code and enhanced disclosures on voting patterns and rationale, and

  • the advent of e-voting.

IiAS’ analysis shows that multiple classes of resolutions are getting defeated - the prominent ones being related party transactions, director appointments and stock option plans.

Under these circumstances, boards need to be more mindful of their roles. They must present well thought-out proposals in the shareholder notices with granular information and disclosures. They must engage with investors at general meetings and investor calls. They must be open to modifying the proposals based on investor feedback.

Investors are no longer voting with their feet but rather sitting across the table., demanding change. Companies need to pay them heed.

For the full report, please click here.

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