IAI Actuarial Core Principles · Business Finance · Ethical responsibilities of owners and managers
A large institutional investor in an Indian listed company decides to follow a stewardship approach. Which action is most consistent with ethical stewardship by that shareholder?
Ethical stewardship means exercising votes on an informed basis and being transparent about voting decisions. Blind support, routine abstention, or exiting at every disagreement abdicates ownership responsibility, and using non-public information to trade is both unethical and unlawful.
- AVoting on resolutions after reading the proposals and recording the reasons for its voting decisionsCorrect
- BSelling the shares immediately whenever management disagrees with it
- CPassing non-public information from the company to its fund managers to trade ahead
- DAbstaining on all resolutions to avoid conflict with management
- Always voting in favour of the board to maintain good relations
Explanation
Stewardship involves engaging with and monitoring investee companies and exercising votes thoughtfully, with transparency about voting. Blind support or abstention abdicates the role, and trading on non-public information is unethical and illegal.
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