Shareholders’ guiding light

I work at a proxy advisory firm. Our main task is to analyse resolutions that are put to shareholders to vote, such as financial statements, director appointments, chief executive officer remuneration, employee stock option plans, merger & acquisition transactions, and more, by providing data and independent voting recommendations to investors.

- 

We are reaching the end of the FY25 voting season —the four-month period between June and September — when most listed companies in India hold their annual general meetings (AGMs). As expected, this is the busiest time of the year and often brings with it, brickbats and criticism. While most companies voice concerns privately, a few air such grievances publicly, and, in rare instances, we face lawsuits or police complaints.

Critics argue that proxy advisory firms apply criteria that often differ from local regulatory requirements, leading to a lack of uniform recommendations across firms. Additionally, over time, institutional investors have increasingly “outsourced judgement” to proxy advisors, allowing them to overstep their advisory role. Such criticism, however, reflects the growing pains of a maturing market infrastructure rather than fundamental flaws with proxy firms themselves. They arise from a misunderstanding of the role proxy advisory firms play and from overlooking the rapid evolution of our markets.

Recent Stanford research by David Larcker and Brian Tayan shows that proxy advisors’ function simultaneously as information intermediaries (digesting and distilling shareholder meeting and governance data), issue spotters (highlighting matters deserving scrutiny), and agenda setters (influencing corporate practices through guidelines). This multifaceted role explains both their value and the controversy they generate.