Indian regulator mandates funds’ proxy voting transparency and female directors

Series of changes to corporate governance regime

The Indian financial regulator has ruled that the way mutual funds vote at company annual general meetings is to be subject to greater transparency.

The Securities and Exchange Board of India (SEBI) – in a set of sweeping changes to the country’s corporate governance regime – has also ruled that all listed companies should have at least one female director.

SEBI said: “In order to improve transparency as well as encourage mutual funds to diligently participate in corporate governance of the investee companies and exercise their voting rights in the best interest of the unit holders, voting data along with rationale supporting their decision (for, against or abstain) be disclosed on quarterly basis on their website.”

The data is to be auditor certified and reviewed by asset management company’s boards and their trustees, SEBI added, following a board meeting in New Delhi last week.Turning to listed companies, there will now be a requirement for “at least one woman director on the board of the company” SEBI says.

There will also be “enhanced disclosure” of remuneration policies and a limit to the number of boards an independent director can serve on. They will be restricted to seven board appointments (three where they serve as a full-time director).

Nominee directors will no longer be able to be defined as independent directors. SEBI is also calling for companies to set up ‘stakeholder relationship’ committees. Under the new rules, directors will undergo performance evaluation.
The regulator also approved the proposal to put in place principles of Corporate Governance, which covers shareholder resolutions and succession planning.

The changes will be applicable to all listed companies from October 1.