‘Majority promoter stake in most firms influences voting outcomes'

Indian Express

01-06-2025

Despite an increase in institutional ownership, promoters continue to maintain majority stake in most companies, allowing them to exercise a significant control over voting outcomes in shareholder meetings, according to a report by the Institutional Investor Advisory Services (IiAS), a proxy advisory firm.
In the report – Shareholding Meetings Review for 2024, IiAS analysed shareholder meetings for the NIFTY500 companies, with focus on voting behaviours and evolving corporate governance practices.
'Their (promoters) dominant shareholding, combined with consistently high participation in voting, often results in outcomes that favour their interests. Since August 2011, our data shows that only one in every 200 resolutions has been defeated – evidencing the outsized influence of promoter ownership,' IiAS said in a report.
The report said that a total of 1,057 shareholder meetings were held, where 4,840 resolutions were put to vote in 2024.
Five resolution categories – director appointment, adoption of accounts, remuneration and compensation, dividend distribution and auditor appointments re-appointments – accounted for over 71.4 per cent of all resolutions.
During the calendar year 2024, promoters held 51.18 per cent of the equity in NIFTY500 companies and voted 78.69 per cent of their shares. On the other hand, institutional investors owned 26.61 per cent of the equity and cast votes on 79.29 per cent of their eligible shares, with the median voting level at 87.2 per cent.
The 'Others' category of shareholders had the lowest equity ownership (22.21 per cent) and the lowest share of votes cast (19.06 per cent).
The report said that the promoters' abstentions were primarily in cases where resolutions required a majority-of-minority vote. A majority-of-minority vote is a mechanism in which majority of the minority shareholders are needed to pass a resolution. In this voting mechanism, majority shareholders are excluded from voting.
'When they did vote, promoters almost always supported the resolutions – in the rare 0.1 per cent of instances where they voted against, it was largely due to intra-promoter disputes,' the report said.
Institutions generally supported resolutions as well, voting against only 5.44 per cent of their shares.
Of the 4,840 resolutions proposed by NIFTY 500 companies, 24 were defeated. This included – director appointments (11 resolutions); employee stock option plans (ESOPs) (six); related party transactions (RPTs) (three); alterations to charter documents (two) and restrictions on board powers (two).
ESOPs continue to face the highest investor dissent, followed by remuneration and compensation (of managing and executive directors), restrictions on board powers, director appointments, alterations to charter documents, it said.
Dissent on RPTs has declined since these now require a majority-of-minority vote.
The report said that regulators have attempted to address the imbalance (dominance of promoters in controlling voting outcomes) by limiting the delegation to the board, with shareholders needing to sign-off on most decisions.
To further strengthen shareholder democracy, IiAS has recommended the board adopt – or regulators mandate, a shareholder dissent review mechanism.
Under this, if a resolution is approved despite significant shareholder opposition, the board will be required to formally engage with dissenting minority shareholders, understand their concerns, and either explain themselves more clearly, or take appropriate corrective actions.
Mandating boards to meaningfully respond to material dissent through a shareholder dissent review mechanism has significant potential to improve transparency and trust, the report said.