In August 2018, domestic and international proxy advisers recommended that shareholders vote against the reappointment of three directors to the board of a leading Indian private sector bank. As the directors in question included the founder of the bank and other industry stalwarts, the voting recommendation drew significant flak. Two out of the three directors backed out of the voting process while the founder-director was reappointed with a very small margin. Following this incident, several industry experts called for greater regulation of proxy advisers, who in this case were, primarily, international companies not in a position to understand the Indian business model of promoter-run businesses and susceptible to formulating voting recommendations on the basis of standard policies applicable to United States-listed companies.
In India, domestic proxy advisers have been subject to the Securities and Exchange Board of India’s (SEBI) regulations since 2014. However, based on the foregoing incident, in November 2018, the SEBI constituted a committee to review the 2014 regulations applicable to proxy advisers and to recommend changes. The committee issued its report to the SEBI in May 2019, and on 3 August 2020, the SEBI released revised compliance guidelines for proxy advisers, which will take effect on 1 January 2021.