InGovern MD Interview in Report Insights

 

InGovern MD Shriram Subramanian was interviewed by Report Insights – a journal on Corporate Reporting in India.

Link to the interview: www.reportinsights.com/Interview.aspx. The interview is reproduced below.

What is the role being played by proxy advisory firms in the context of Indian capital markets and corporate governance?
In the Indian context, proxy advisory firms facilitate positive engagement between companies and investors. They also advocate better corporate governance urging institutional investors to start actively participating at shareholder meetings. InGovern is also bringing in knowledge of global best practices to the attention of regulators, investors and companies.
How well has the Indian corporate sector evolved to adopt the broadly acceptable framework of corporate governance?
Indian corporate laws and governance norms have evolved substantially over the past 10 years. Indian corporate sector adheres in letter to corporate governance norms in India. Most companies adopt better corporate governance practices once it is made mandatory by law. Only a few companies fully adopt corporate governance norms in the right spirit. We notice four distinct categories of companies with each category having similar set of CG issues: (a) Public Sector Companies (b) Subsidiaries of Multinational Companies (c) Indian Promoter owned companies and (d) Banks.
The broad philosophy of proxy advisory firms seems to be focussed around acting as guardians of shareholders’ rights. How successfully have you managed to influence the investors’ so far?
Proxy advisory firms are very new in India, and market participants – companies and investors alike – are slowly getting educated on the role and work of proxy advisory firms. Companies recognize that proxy advisory firms are making vote recommendations and analysing proposals placed in front of shareholders. Investors recognize that proxy advisory firms are viewing proposals in a new paradigm and that research and insights by proxy advisory firms are different. Proxy advisory firms have been successful in raising many issues and bringing to light CG matters of importance. Proxy advisory firms are also engaging with regulatory agencies to incorporate better governance practices while framing regulations that affect investors. The government and SEBI are also taking some progressive steps in the form of the new Companies Bill and eVoting for investors.
When do you foresee the Indian investors-retail and institutional, maturing enough by following the proxy advisory firms advise, to create a difference on the perception about companies?
Investors will evolve in their thinking and in the manner in which they engage with companies on corporate governance matters. It is a continuous process. Newer and newer issues will crop up and in a dynamic economic environment; companies and the requirements from companies will also keep changing. Investors have to keep up with these issues and have to continue to rely on the sophisticated and in-depth research by proxy advisory firms.
How do you perceive Annual Reports as an opportunity for companies to improve their image by showcasing transparency in corporate reporting?
Annual reports are probably the most important, of the many opportunities for companies to showcase transparency in reporting. The quality of annual reports has improved substantially over the past 10 years. Timely and detailed corporate announcements, detailed disclosures in meeting notices, are other opportunities. Companies should also communicate effectively with investors in times of trouble, rather than only in good times.
How is the era of corporate reporting evolving in India following additional elements like sustainable reports, business responsibility statements and CSR coming into fray?
Many progressive companies have already started adopting these additional elements. More companies should start adopting these elements and enhance their reporting practices. Many companies are currently focussed on adopting XBRL for financial reporting, as it is mandatory from this financial year.
Why do you feel that a number of Indian mutual funds have often shied away from actively using their voting rights in key areas of concern effecting some companies over the past two years?
Embracing change is slow, more so, as it is mandatory to vote. Some of the reasons include:Structural problems in Indian capital markets – most Indian asset management companies are owned by business houses that have other business interests or listed group companies.AUMs – a significant part of the AUMs managed by Indian mutual funds comes from clients in the corporate world.SEBI has made the voting disclosures for mutual funds mandatory only since last two years, so, there is a learning curve for Indian mutual funds.