The Indian proxy season for 2017 represented a tipping point for shareholder activism, according to corporate governance advisory service, InGovern with institutional investors now prepared to take on company boards.

In its overview of this year's season, which begins in January and peaks in September in India, InGovern said the number of cases where shareholders dissented against the Board and Management was unprecedented when compared with previous years. Overall, its review found there were about eight companies that faced shareholder activism. Previously individual investors have taken on companies but this year the majority of the shareholder activist campaigns were brought by funds. They included funds like Unifi Capital, Florintree Advisors, IDBI Trusteeship and India Horizon Fund InGovern said.

InGovern said: "This is a very positive development and in the near future we can see institutional shareholders foraying into  constructive activism to have their say on company matters."

The report also noted that while Unifi Capital and Florintree Advisors voiced their grievances through the traditional route of submitting shareholder proposals, India Horizon Fund and IDBI Trusteeship chose the legal route and the non-controlling promoters of Infosys chose dissenting with the board through the media.

This year InGovern had tracked 10,972 proposals across 1,502 companies across the four types of shareholder meetings – AGMs, EGMs, Postal ballots and court-convened meetings. InGovern said that investors’ scrutiny of the resolutions tabled by companies had increased. It found that as many as 45 companies out of the top 100 had at least one AGM proposal that got more than 20% dissenting votes either by institutional or non-institutional shareholders and in one case, by the promoters of the company.

The review also found that directorial appointments and their remuneration were the most scrutinised resolutions by investors in the 2017 proxy season. They comprised 82% of the total resolutions that had a higher percentage of Against votes by investors of top 100 companies. Resolutions for re-appointment of directors retiring by rotation constituted 43% of all dissented resolutions.

The period of three years provided to companies to comply with auditor rotation ended in March 2017. As a result, in the 2017 proxy season, auditors with more than 10 years of tenure were replaced by new auditors InGovern said. However, there had been no such effort or urgency by the companies to replace their independent directors who have been on the board for more than 10 years, the firm reported. This implies that companies only took action to comply with the letter of the law and not its spirit for which it was formed. the report said.