Skip to content

CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Governance Influencers

Sahyadri Industries Ltd. has 30% of its shares held by mutual funds and insurers. A proxy advisory firm publishes a report recommending that shareholders vote against a related party transaction resolution. A director says the firm's recommendation binds the institutional holders. Which statement is correct?

A proxy advisor's recommendation is only advisory. The institutional investor, such as a mutual fund or insurer, retains responsibility for its own voting decision and may accept or reject the advice. Registration of the advisor with SEBI does not make its recommendation binding on clients or on the company.

  1. AThe recommendation binds institutions because proxy advisors are registered with SEBI
  2. BThe recommendation is advisory input only; the institution remains responsible for its own voting decisionCorrect
  3. CThe recommendation binds only mutual funds, not insurers
  4. DThe company must withdraw the resolution once a proxy advisor opposes it

Explanation

Proxy advisors provide research and voting recommendations to clients. Institutional investors must decide and vote on their own responsibility and cannot treat the advice as binding. The other options wrongly attribute binding force to the advice.

Did you get it right without looking?

One question tells you little. A timed set on Governance Influencers shows your real accuracy, how long you take and where you lose marks.

Practise Governance InfluencersFree diagnostic mock

More Governance Influencers questions