What are “proxy advisory firms”?

Subject: Economy

Section: Capital market

Context::Proxy advisory firms oppose Anant’s appointment on RIL board.

Key Points:

A proposal to appoint Anant Ambani (28), the youngest son of Mukesh Ambani, on the board of Reliance Industries Ltd (RIL) is facing opposition from two proxy advisory firms.
The firms – Institutional Investor Advisory Services India Ltd (IiAS) and Institutional Shareholder Services (ISS) – have advised RIL shareholders to vote against the proposal. However, they are backing the appointments of Anant’s elder siblings – Isha and Akash – both 31 years of age, on RIL’s board.

Why the decision to oppose?

IiAS and ISS have cited Anant’s age as the reason for not supporting the proposal for his appointment on the RIL board.
At 28 years of age, his (Anant’s) appointment as a Non-Executive Non-Independent Director does not align with voting guidelines of the advisory firms.

What are proxy advisory firms?

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.

How many proxy advisory firms are there in India?

Some of the major proxy advisory firms in the country include IiAS, Stakeholders Empowerment Services (SES) and InGovern.
Proxy advisors are regulated by the markets regulator Securities and Exchange Board of India (Sebi).

Why are proxy advisory firms important?

Proxy advisory firms closely look at listed companies, their performance and resolutions, and advise shareholders about their rights.
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 also work with companies to improve their corporate governance practices.