The researchers found that the Stewardship Codes can be inferred to be mere tokenistic transplantations meant to attract foreign investors with a negligible bearing on the corporate governance regime of the Indian companies.
Authors
Sakshat Bansal, Assistant Professor, Jindal Global Law School, O.P. Jindal Global University, Sonipat, Haryana.
Rusha Ghosh Dastidar, student at Jindal Global Law School, O.P. Jindal Global University, Sonipat, Haryana.
Summary
The Stewardship Code, 2019 came into effect on 1 July 2020. This is the third Code put in place to fortify the foundations of the stewardship responsibilities to be undertaken by different institutional investors in India.
These responsibilities are off-shoots of the stakeholder theory introduced in the Companies Act, 2013. Much like the Indian Companies Act, the Stewardship Codes in India greatly emulate the essence of United Kingdom legislation.
However, unlike the diffused shareholding pattern observed in the UK, Indian companies exhibit a concentrated shareholding pattern in the hands of the promoter group. Hence, a critical analysis is crucial to understand the impact of the implementation of these Codes in India on institutional investors’ activism.
Institutional investors are primarily responsible for diligently investing their clients’ money to yield profits. To analyse the potency of institutional investors’ activism fuelled by these responsibilities, the researchers studied data from the annual general meetings (AGMs) of the top 10 Nifty-50 companies, over a period of four years.
The researchers found that the Stewardship Codes can be inferred to be mere tokenistic transplantations meant to attract foreign investors with a negligible bearing on the corporate governance regime of the Indian companies.
The authors believe that this paper can serve as a background for future research to study the overall institutional investors’ contribution towards the upkeep of the corporate governance of their investee companies.
Published in: Economic and Political Weekly
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