Jitendra Ambastha, Senior Consultant, TCS Financial Solutions
Voting in companies is a critical aspect that leads to informed decision making by all shareholders. When shareholding spread across geographies, the concept of proxy voting came into being. Proxy voting is, by definition, an exercise of voting rights by investors/ shareholders through a third party and is based on a legal and authorization agreements between the shareholder and proxy voter. The voting is requested for by the issuer company, primarily, on occasions such as an Annual General Meeting, or a Special General Meeting or a Bond Holders Meeting (For Debt Securities).
Some of these meetings are needed as per statutory requirements, involving a large number of companies and thereby making the process of voting quite complex. The complexity is further added by participation of many intermediaries acting between shareholders and issuers. As these meetings have a significant impact on the business of companies, it is critical that investors, especially institutional investors, are actively engaged.
Standardizing proxy voting has been on the agenda for some time now with many expert committees being set up to offer resolution, but these efforts have had limited success. Though electronic voting has brought in many improvements, the proxy voting process is still considered to be one of the most complex—one that is in dire need of standardization. Complexities arise due to a) Diverse rules and practices across markets and, b) Lack of communication standardization.
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