Proxy advisory firm
Also called: Proxy adviser · Topic: Industrial Policy, Public Sector, MSMEs and Disinvestment · NCERT: Beyond NCERT
Meaning
A proxy advisory firm studies the resolutions that shareholders vote on at company meetings. It then advises institutional investors how to vote. Institutional investors are big investors such as mutual funds and insurers. These investors hold shares in hundreds of companies and cannot study every vote themselves. Proxy advisers therefore help check promoter-dominated boards and protect minority shareholders. In India they must register with SEBI.
Example
IiAS, InGovern and SES are SEBI-registered proxy advisers. If a company proposes a large pay rise for its promoter-chairman, an adviser may recommend that mutual funds vote "against" it.
Don't confuse with
- Shareholder activism: activism means shareholders themselves use their ownership rights to push management, as in Invesco vs Zee (2021). A proxy adviser only recommends and does not own the shares.
Related concepts
- Corporate governance
- Independent director
- Related-party transaction
- Beneficial ownership
- Shareholder activism
- Corporate social responsibility
- ESG
- Business responsibility and sustainability reporting